China’s biggest carmaker will pour $3B into electric vehicle production

electric carsHONG KONG — China’s largest automaker, SAIC Motor, has unveiled a multibillion-dollar investment plan in green car production and pledged to build hundreds of thousands of charging points, signaling the country’s latest efforts to take the lead in the global race for electric car development.

China, already the largest auto market in the world, is keen to clean up its transportation fleets as it seeks energy security and better air quality. Government officials have vowed to put 5 million units of pure electric cars, plug-in hybrids and fuel-cell vehicles on the road by 2020, and carmakers from all over the globe are scrambling to get a slice of this emerging market. (Fuel-cell cars use hydrogen fuel to generate electricity.)

In a statement issued yesterday, Shanghai-based SAIC Motor said it will invest more than 20 billion yuan, or about $3.2 billion, in its clean energy vehicle development over the next five years. The company also plans to introduce 30 new models and reach a sales target of 600,000 units of green cars by 2020.

SAIC Motor is not the only one betting on China’s demand for green cars. Another industry leader, Warren Buffett-backed BYD Auto Company Ltd., earlier this year announced to raise $787 million for the research and development of clean energy vehicles. And last week, Elon Musk, CEO of Tesla Motors Inc., told participants at a forum in Beijing that his company is in talks with Chinese officials about producing electric cars in China.

Hefty incentives help sales

Sales of electric cars and other types of clean energy vehicles have more than tripled in China so far this year, while overall vehicle sales have increased by merely 0.3 percent, as shown in the latest data from the China Association of Automobile Manufacturers, an industry group in Beijing.

In September alone, industry statistics show, 28,324 clean energy vehicles were rolled off production lines in China, a year-over-year increase of 210 percent. Meanwhile, Chinese customers bought 28,092 of them, 220 percent more than a year ago.

Analysts attribute such increases to growing government support. Since last year, the Chinese central government has exempted clean energy vehicles from a 10 percent purchase tax, and local authorities have rolled out their own incentive programs.

Shanghai city, for one, has began to offer a free license plate to green car drivers. By contrast, plates for a conventional gasoline-powered auto can cost $12,000 and up.

Where do you plug them in?

But despite the favorable government policies and sharp growth in recent green car sales, China’s clean energy vehicle promotion still lags far behind the government target.

The country aims to reach green car ownership of 500,000 units before 2016. “It is impossible to meet that target,” said John Zeng, an analyst in the Shanghai office of British consultancy LMC Automotive Ltd.

Zeng said even after generous state subsidies, the Roewe 550 Hybrid, the flagship green vehicle of SAIC Motor, costs 70 percent more than a traditional vehicle running on fossil fuels. He added that a dearth of charging stations is also holding back adoption of electric cars.

According to official data, more than 120,000 electric cars and plug-in hybrids had been sold in China as of the end of 2014, while the country had built 780 charging stations and 31,000 charging points by that time.

To help overcome that barrier, SAIC Motor yesterday announced a partnership with the municipal government in Shanghai’s densely populated Huangpu district to invest 300 million yuan ($47 million) in charging stations and services related to green vehicles. The carmaker said it will install 50,000 charging points across the country by 2020.

Photo courtesy of Flickr

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