Billions Riding On The Proper Way Forward For Electric Cars

Will the electric cars of tomorrow be plug-in hybrids or battery electrics? That’s the question the world’s auto makers are asking themselves right now. It is an issue that is especially important for the Chinese market, where more than 20 million new cars were sold last year. Right now, China has some hefty incentives for drivers who buy what is called a “new energy vehicle.” Basically, that means anything that does not rely on a conventional internal combustion engine as its only source of power. Hybrids, plug-in hybrids and battery electric cars all qualify for the “new energy” label. Sales of those cars quadrupled in 2015.

But this week, Lou Jiwei, China’s finance minister, said his government intends to reduce existing subsidiesby 20 percent over the next two years and 40 percent between 2019-2020. After 2021, Lou says subsudies will be phased out altogether. His government does not want manufacturers to become too reliant on  handouts. So much for Communist doctrine.

He publicly praises the credit trading system created by the California Air Resources Board, saying China should use CARB and its policies as a model. “Credit trading is the most effective way to ensure government neutrality on the technology’s development. The market should be able to choose the technical route,” he said.

Of course, there are direct subsidies, like rebates and tax credits. Then there are indirect subsidies. In most Chinese cities today, it is virtually impossible to register a conventional car, while new energy customers can get a registration quickly and easily. China is also spending big on charging infrastructure. It says it will have the capacity to recharge 5,000,000 cars a day by the end of 2016. But only people with cars manufactured in China or in cooperation with a Chinese company will be allowed to access the charging network.

These proposed policy changes leave car makers in a bit of a quandary. According to Reuters, Tesla, NextEV, and Bejing Auto Group have gone all in for electric cars. But executives at Volkswagen and BMW think plug-in hybrids are the key to the electric car future, at least in the near to medium term. “Once we leave the city, we are forced to confront the problem of a nationwide high-powered charging infrastructure – if you really see it as a realistic goal, I personally have some doubts – to drive pure electric over long distances,” said Jochem Heizmann, head of Volkswagen Group China.

BYD, one of the largest new energy car companies in China, focuses on plug-in hybrid technology for passenger cars but battery electric power for buses. It recently delivered the largest order of electric buses ever to the city of Shenzhen. Between plug-in and battery electric cars, it sold more passenger vehicles with plugs than any other company in the world last year — more than 62,000 of them.

The plug-in versus battery electric debate is going on all over the world. Most people think pure electric cars will win the marketplace eventually, but that may take 20 or more years to happen. In the meantime, plug-in hybrids will have an important role to play, even if they will be mere curiosities by the time 2050 gets here.