Government Responsibility to Drive New-energy Car

New-energy vehicles have been made exempt from the annual vehicle and vessel tax, the Ministry of Finance announced yesterday, as part of the government's effort to boost the use of green vehicles in China.

'The move indicates that the government is hoping to guide consumers toward purchasing low energy consumption vehicles, and shows a supporting attitude to China's new-energy auto sector,' Zhang Yu, managing director of Shanghai-based Automotive Foresight Co, told the Global Times yesterday. However, Zhang noted that the vehicle tax for cars with engine capacities of up to 2.0 liters (accounting for the majority of domestic cars) is only some 400 yuan ($63.38) each year, which means the policy may not be a very strong stimulus for sales of new-energy vehicles.

Currently, new-energy cars are still not widely accepted by Chinese consumers. In 2011, only around 8,100 new-energy vehicles were sold nationwide, compared with a total of 18 million vehicles sold in the domestic auto market during the same year. Earlier this week, the Ministry of Science and Technology released a five-year plan to guide the development of the country's new-energy vehicles. The plan said that electricity-powered vehicles will account for a majority of new-energy vehicles by 2020.

However, analysts noted that progress in battery technologies and construction of charging stations will be vital for domestic new-energy producers, and it remains unlikely that the sector will gain a strong foothold any time soon. 'A car battery can only last for cruising 300 to 400 kilometers, which will be very inconvenient for consumers if there are not enough charging stations. Besides, an electricity-powered car and may cost twice the price of a regular car, something that has put off many consumers,' said Zhang. Zeng Zhiling, an auto analyst at Shanghai-based LMC Automotive, said that a reduction in the vehicle purchase tax, which currently accounts for 10 percent of a car's price, would serve as a much more effective incentive for the sector.

Zeng noted that it is still hard for new-energy vehicles to get accepted by most consumers, and that to reduce prices and improve technologies will be the key factors for further development in the sector. 'New-energy automobiles might at best manage to gain a 4 percent market share in the domestic auto market by 2020. It would be better for the government to first introduce new-energy vehicles in the public transportation sector, instead of trying to boost consumption among regular consumers,' said Zeng.