New energy vehicles are displayed on a Shanghai street on October 28, 2013. Photo: CFP

Air pollution has become a national concern in China after some cities such as Beijing found themselves choked in smog.

Smog blanketed northern and eastern China for almost the whole of the last week of February until rain and wind dispersed the pollution on late February 26.

Before the rain, the average level of PM2.5 in Beijing was 450 in the downtown area on February 26, nearly 18 times World Health Organization guidelines, according to data from Beijing's environmental monitoring center.

Yu Jianhua, director of the air pollution control division of the Beijing Municipal Environment Protection Bureau, said about 22.2 percent of the smog in the city came from vehicle emissions, news portal people.com.cn reported on February 1.

At an executive meeting of the State Council on February 12, Chinese Premier Li Keqiang said that dealing with air pollution has become the top priority for people's well being and called for speedier measures to eliminate cars that do not meet emission standards.

Phasing out cars with excessive emissions is one of ten measures released by the State Council in September 2013 to control air pollution.

The ten measures also include promoting new energy vehicles by giving subsidies to buyers and encouraging public transportation to use these green vehicles.

Goals and preferential policies

China released a guideline in 2009 for auto industry development from 2009 to 2011.

The guideline set a goal of producing and selling 500,000 cars that are partially or fully powered by electricity in the three years.

However, data from the China Association of Automobile Manufacturers (CAAM) showed that the production and sale of new energy vehicles in 2011 was only 8,368 and 8,159 respectively. 

In 2012, the State Council released a new guideline for developing new energy vehicles from 2012 to 2020, establishing new goals for production and sales of green cars to reach 500,000 by 2015.

It is hardly possible to accomplish that goal, Zhang Zhiyong, a Beijing-based independent auto industry analyst, told the Global Times Tuesday.

From 2009 to 2013, the total production and sales of new energy vehicles was around 51,000, Zhang said, noting it is impossible to produce and sell the remaining 450,000 green cars in 2014 and 2015 as the goal requires.

In a bid to fire up an unenthusiastic domestic market, China has provided subsidies to buyers of domestic new energy vehicles.

In 2012, the central government released subsidy standards ranging from 35,000 yuan to 60,000 yuan for an electric car and 35,000 yuan for each hybrid electric vehicle.

Meanwhile, customers can also receive subsidies from local governments. For instance, Beijing provides a maximum of 60,000 yuan for each electric car and up to 50,000 yuan in subsidies for each hybrid electric car.

The subsidy in 2014 would have been 10 percent lower than 2013, and 20 percent lower in 2015, according to the previous plan.

In a bid to further encourage the market, China slowed down the subsidy reduction by releasing a notice on February 8, in which the subsidy in 2014 and 2015 will only be 5 percent and 10 percent lower than that in 2013, according to the website of China's central government.

In addition to the subsidy policy, local governments are also promoting new energy cars through public transportation and building a charging network.

At the beginning of 2014, 100 electric taxis were put into use in Beijing's Changping district, chinanews.com reported Tuesday.

Beijing will build 1,000 charging piles this year, The Beijing News reported Monday.

However, the data from CAAM showed that in 2013, more than 20 million vehicles were sold in China, but only 17,642 of them were new energy vehicles.

In Beijing, while 1,660 new energy car plates were offered in the latest plate lottery, only 1,428 people applied for them, news portal caixin.com reported Monday.

Regional protectionism

Although the maintenance of electric vehicles is cheaper than traditional ones and charging costs are also lower than oil costs, the high car price and concerns regarding battery charging are still pushing customers away, Jia Xinguang, an executive director at the China Automobile Dealers Association, told the Global Times Tuesday.

Therefore, compared with electric cars, hybrid electric vehicles, such as BYD's Qin, might be more attractive to the market, and especially individual buyers, he said.

However, Qin cannot enjoy local subsidies in Beijing because the automaker BYD is located in Shenzhen, South China's Guangdong Province.

Regional protectionism is the biggest obstacle facing new energy vehicles in China, Zhang said.

Local governments want to protect local automakers, so they shut the door to outside competitors by not giving local subsidies or car plates to these cars, said Zhang.

To break this protectionism, China's National Development and Reform Commission released a notice in September 2013 forbidding local governments from setting restrictions on green cars from other cities, Shanghai-based newspaper China Business News reported Monday.

Shanghai Municipal Commission of Economy and Information announced on February 25 to give E150, an electric car produced by Beijing-based auto maker BAIC Motor, and Qin free car plate in Shanghai.

Beijing counterpart said on February 27 that BYD's E6, an electric car, can enjoy local subsidy in Beijing.

But the implementation of the notice will not be accomplished in one stroke, Zhang said.

Anhui Jianghuai Automobile Co announced its electric car could have Shanghai car plates for free, which is the first time that Jiang­huai's electric car has entered a market outside East China's Anhui Province, where the company is located, China Business News reported.

But Jianghuai's car still cannot enjoy local subsidies in Shanghai, the report said.

Considering the positive effects of reducing air pollution, new energy vehicles are a definite trend in the auto industry, but only a free market can truly help it develop, Zhang said, suggesting local governments should end all restrictions and intervention in the market.

Despite the lackluster sales, Chinese automakers are enthusiastic about new energy vehicles.

Zhejiang Geely Holding Group Co announced it was acquiring British electric vehicle maker Emerald Automotive, and will invest at least $200 million in the coming five years to develop electric vehicles, Wall Street Journal reported on March 1.

Yang Xueliang, a spokesman for Geely, said that with the acquisition, Geely planned to develop new energy vehicles for London taxis and then for other markets including China, the report said.