The Chinese government is strongly committed to the EV, which in China is known as a “new energy vehicle.” In an effort to cope with chronic smog in its largest cities, it is building new solar and wind farms at a furious pace so it can shut down the coal powered electric generating plants that are poisoning its citizens. It has also declared war on tailpipe emissions. That means official government incentives ignore traditional hybrids like the Toyota Prius entirely.
The incentives are working. China is seeing explosive growth in the EV market both for battery electric and plug-in hybrid cars. But not all car makers in China agree with the government’s policies. According to Automotive News China, a growing number of domestic automakers are teaming up to develop conventional hybrids.
Just this month, China Hybrid Systems Co., a company funded by a consortium of Chinese carmakers and suppliers, broke ground for a plant in the central China city of Changsha. The new factory represents an investment of $568 million. It will be capable of building 300,00 hybrid cars a year, starting in 2017. It is led by Zhejiang Geely Holding Group Co. and battery supplier Hunan Corun New Energy Co.
Corun chairman Zhong Faping disagrees with Beijing’s subsidy policy favoring EVs and plug-in hybrids over conventional hybrids. He thinks government officials should not arbitrarily pick alternative energy vehicle technologies. A battery engineer, Zhong believes in hybrid oowertrains. Since 2011, his company has been heavily involved in producing nickel-metal hydride batteries for hybrid vehicles. His argument will sound familiar to Americans who are following the debate in the US about the role regulations should play in implementing the agreements arrived at between the US and other world powers at the COP21 climate conference in Paris last December.
Geely chairman Li Shufu cautions that the complexity of EV technology makes it hard to tell which powertrain will prevail over the long term. He also thinks conventional hybrid technology, which has proved its worth over the past decade or more in the US and Japan, is more suitable for China. One big advantage of a conventional hybrid is it doesn’t require an infrastructure of battery charging stations the way a plug-in or battery powered EV does.
Zhong and Li both doubt that China can sustain the dizzying sales growth of “new energy vehicles.” Although sales quadrupled to 331,000 units last year, the government plans to eliminate its current incentive program by the end of 2021. After that, both men think automakers will find it extremely difficult to meet the fuel economy standard of 47 mpg that will be in place by that time without using conventional hybrids. Honda announced recently that it will rely heavily on hybrids for the cars it sells in China in coming years.
Geely would like to partner with other Chinese automakers and suppliers beside Corun. Zhong says the China Hybrid Systems consortium has grown to seven domestic automakers plus several suppliers. Its two newest members are heavyweights in China’s auto industry — Changan Automobile Co., China’s largest passenger vehicle maker, and Yunnei Power Co., a major state-owned manufacturer of diesel engines. Deadlines for China’s fuel efficiency targets are nearing and construction of battery charging facilities is far behind schedule. That means Chinese carmakers and suppliers may have no choice but to join Geely and Corun in developing hybrid powertrains.
How China decides to use government policy to promote fuel economy and emissions standards may have repercussions on the global car market, since China is currently the largest automobile market in the world. Foreign companies doing business in China may bring the lessons they learn there home to their domestic operations. Other governments will also be watching China closely to see which policies work and which don’t.
Photo Credit: Geely Motors