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China gears up for green cars push

CHINESE auto makers have accelerated efforts to develop electric cars and take a leadership role in the next generation of vehicle technology after last year's record high oil prices and concerns about climate change fueled a global push toward green cars.

Still, analysts don't expect a rapid transformation in the world's second-largest auto-making market in the next 10 years because battery technology, supplier chain and infrastructure need upgrading.

"The Chinese government has adopted aggressive plans to boost new energy vehicles,?said Wang Aiping, an analyst at automotive consulting firm, Global Insight. "But within the next 10 years, large-scale production will still remain a great challenge.

Obstacles: Bottlenecks restrain market demand

Obstacles are still throttling the industry's rapid advance.

"Among bottlenecks holding the industry back are weak battery technologies, battery charging networks, electricity supply and recycling of used batteries,?said Zhao Junhua, general manager of the powertrain system at CSM Corp, an automotive consulting firm.

Dealers said individual buyers may not take to BYD's F3DM hybrid vehicle because no battery-charging network has been set up yet. The weak infrastructure also prevented overseas car makers, including General Motors Corp, from adopting large-scale testing of electric vehicles in China.

The auto parts industry is yet another hurdle. Overseas auto parts suppliers, including Delphi Corp, Johnson Controls Inc and Continental Auto Parts, have set up manufacturing bases in China to supply Chinese-made electric vehicles, but prices of the components are usually expensive, making it hard to attract interest.

There's little help from domestic suppliers, who are struggling with weak technological capability in an industry that is highly fragmented.

"Chinese battery makers have their own specialties, but none of them is able to start mass production and their products lag behind foreign brands in terms of durability, recharging speed, safety and overall cost,?Zhao noted.

According to CSM, sales of passenger vehicles using hybrid and electric technologies will surpass 100,000 units by 2015, accounting for 1 percent of China's total passenger car sales. Sales of the all-electrical vehicle will be about 20,000 units.

Automotive consulting firm Global Insight is also taking a conservative view on expansion of electric vehicles.

"The market share of electric vehicles is not expected to grow significantly unless the industry gets financial subsidies,?said Wang Aiping, an analyst at Global Insight. "Only after 2020 do we expect electrically powered vehicles to attract more market demand, both in public transport and in the private auto market. We think electric vehicles will be mainly used in cities for daily commuting.?

The relatively higher prices of electric vehicles make them unattractive to cost-conscious consumers, particular after fuel prices dropped at the end of last year.

"Compared with gasoline, electric vehicles suffer the disadvantage of high prices, safety concerns and inconvenience in after-sale servicing,?Wang said.

"It's time to offer subsidies to individual consumers too,?he said.

The United States offers incentives for consumers to buy Toyota's hybrid Prius model but China gives no tax breaks or other carrots to entice private buyers to purchase green cars.

Japan's Nissan Motor Corp said last week it would offer a comprehensive plan to the Chinese government to develop and market electric vehicles in China.

The firm also said that it will help in building battery-charging networks with the intention to sell its first electric cars in China in 2011.

Efforts: State allocates extra funds for hybrids

The development of electric vehicles has been powered by increased investment from the government.

China has said it will allocate 10 billion yuan (US$1.46 billion) in the next five years to upgrade car-making technology and engineer the development of fuel-efficient, clean-burning vehicles. That's more than 12 times the investment in the industry in the five years ended 2005.

The additional spending is targeted at 200 auto makers, suppliers and research institutes across the nation.

On the consumer front, the government has launched a trial program in 13 cities, providing public transport and government offices a subsidy of as much as 60,000 yuan toward the purchase of electric vehicles. A subsidy of 50,000 yuan is provided for the purchase of hybrid vehicles, and 250,000 yuan is available to those buying fuel-cell buses.

The government is targeting an annual production capacity of 500,000 new energy vehicles by 2011, including plug-in hybrid and electric cars. That goal includes 20,000 all-electric cars.

Alternative fuel energy vehicles are expected to account for 5 percent of China's total passenger car sales, according to the government's blueprint.

China's promotion of clean energy vehicles is the result of increasing pressure for more stringent environmental protection and the nation's need to protect its energy security amid rapidly expanding vehicle use among its population.

China is also keen to catapult its auto industry to be more competitive against global rivals.

The nation has rapidly embraced the automobile in the past six years as personal incomes rose and the industry expanded rapidly.

There are now an estimated 56.97 million vehicles in China, or about 50 cars for every 1000 people. New car sales have maintained a more than 20-percent growth since 2005 before the onset of a global financial crisis last year.

There are expected to be an additional 10 million vehicles on the roads in China this year.

Clean energy vehicles are the latest buzz in the auto industry.

Chinese auto maker BYD Co launched the world's first mass-produced hybrid electric vehicle, the F3 Dual Mode sedan, at the end of last year.

Chery Automobile Co rolled out its first self-engineered electric car, the S18, in February.

The Jie Xun hybrid vehicle developed by Chang'an Auto Group rolled off the assembly line in early 2008, and Shanghai Automotive Industry Corp test ran its fuel cell and electric vehicles during the Challenge Bibendum in 2007, a competition featuring alternative fuel vehicles.


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