China’s Subsidies For Lithium-Ion Batteries Could Be Overkill


Originally posted on CleanTechnica

2014 has proven to be a watershed year for plug-in cars in China, as production and sales pf electrified vehicles nearly tripled and the government launched an initiative aimed at increasing the number of charging stations. But there’s still plenty to be done, and the next initiative could take aim at the most expensive part of electric vehicles; the battery.

Renewable Energy World reports that the Chinese central government is considering subsidy policy for vehicles with lithium-ion batteries, even though the country already has three times as much battery capacity as it needs. By some estimates, there are enough battery factories to be building up to 300,000 plug-in cars. Yet the largest market for plug-in cars, the U.S., only saw just over 100,000 sales in 2014. Even if sales of plug-in vehicles triple in China this year (as predicted), that will only amount to about 120,000 plug-in hybrid and battery electric vehicles.

There are concerns this could lead to a lithium-ion battery bubble, especially as automakers like Toyota and Honda make plans to open even more factories, in order to take advantage of this new subsidy. It’s not just traditional automakers either; Apple iPhone builder FoxConn wants to get into the EV battery game with a $700 million plant of its own, and Tesla wants to open a factory there eventually as well. Speaking of Tesla, the battery Gigafactory will be able to build more batteries than all of China once at full capacity. So the concerns about overcapacity in the Peoples Republica seem legit.

The importance of incentives encouraging early adopters of electric vehicles should not be understated, but there comes a point where they may do more harm than good. In major cities like Shanghai and Beijing, the local government has offered free license plates (a $15,000 value) to buyers of EVs. There’s also an exemption from the national 10% tax on cars for locally-made electric vehicles, and a $16 billion investment into a larger national charging infrastructure.

It’s fair to say that China is working hard to encourage people to drive EVs short of just giving them away, something Japanese politicians have considered to jump-start hydrogen fuel cell vehicle sales. There are however those who think the incentives are dearly needed, and that by 2020 China could be the largest market for EVs in the world. The country plans to subsidize plug-ins at least through 2020, but if the effort doesn’t take, there will be a lot more batteries than plug-in buyers.

And that’s when the battery bubble will burst.

Christopher DeMorro

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or else, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.