China announced government officials on Sunday they should start using more electric and plug-in hybrid cars as part of its decreasing pollution plan. 5 million electric vehicles are meant to hit the roads by 2020. China is demanding that electric cars should make up at least 30 percent of government vehicle purchases by 2016, according to the National Government Office Administration. In other words Chinese officials are bound to use electric cars.
Therefore this implies an instant boost for electric car makers such as BYD Co. Ltd. Shares in the company climbed 3.6% in morning trading in Hong Kong.
Government agencies will be financially supported in order to buy new-energy vehicles, which the government defines as plug-in electric hybrids, hydrogen electric fuel-cell cars and all-electric vehicles. These electric vehicles are regarded as a strategic industry that needs to be supported to help it gain global leadership, reduce energy dependence and cut smog that often reaches hazardous levels in Beijing and other cities such as Tianjin, Hebei, the Yangzi River Delta and the Pearl River Delta, which are all areas suffering from thick smog.
“This is a laudable aspiration,” according to Yang Song, a Hong Kong-based analyst at Barclays Plc, who also estimates that government purchases actually made up less than 10 percent of total new vehicle sales in China. “Government purchases are not growing as fast as private consumption. So just to rely on the government purchase would be a challenge.”
This announcement comes in support of a last week’s one, that announced a tax break meant to exempt buyers of new energy vehicles from a 10% vehicle tax from September 1 until the end of 2017. The tax break also applies to foreign automakers; In other words, U.S. companies such as Tesla Motors Inc. could get a cut of the action. The government purchasing rules also stipulate that government agencies cannot limit the purchase of foreign electric car brands.
However Tesla Model S Sedan’s price in China is of approximately $120,000, therefore it’s unlikely that any will be purchased by government agencies. The purchasing rules announced Sunday offer subsidies for the purchase vehicles that cost less than 180,000 yuan ($29,186), subsidies included, making BYD’s cheaper electric vehicles more attractive.
Besides Tesla Motors Inc., BMW and Volkswagen are also highly interested in developing their electric car sector in China. The first began trading in China back in April and according to Chinese media reports, Tesla has sold around 1,300 vehicles so far.
