25 September 2018

Local favoritism cuts both ways for electric car makers

Many observers cite customer wariness as being the biggest roadblock for the electric car market in China. Concerns about the vehicle price, lack of adequate charging facilities, limited driving range and safety issues are seen keeping sales of those alternate energy cars in check.

But compared to customers, local government officials and party cadres may actually be an even bigger hurdle, a problem car companies can do little about.

It’s natural for regional governments to extend favors to local companies. As electric cars are expected to play a pivotal role in China’s pollution fight and car industry upgrade, it is no surprise many local cadres see electric cars as a must-have project and a means of showing off their technological prowess.

When the central government says ‘go green, go electric’, it is important for local authorities to respond and support the nation’s policy goal.

Thus, under the 12th five-year plan, 21 provinces had decided on new energy vehicles as a strategic sector, with 12 of the provinces aiming to build that business into a major industry, as the China Securities Journal noted.

Favoritism for local firms cuts both ways. Take Shenzhen-based BYD Co. (01211.HK), for example. The company has been enjoying the special care of the municipal government, but when it tries to sell its cars in other parts of China it encounters obstacles due to the same system in those places.

As BYD is to Shenzhen, Changan Automobile (200625.CN) is very important to Chongqing. Likewise, Chery Automobile is one of the main focuses of Anhui, and Dongfeng Motor (00489.HK) to Wuhan.

Invisible roadblocks are everywhere. Local firms get better access to local subsidies, apart from dole-outs from the central government, as the criteria for entitlements can always been twisted, the Journal pointed out.

Everyone knows scale holds the key to pushing down the costs of electric cars and related components. But, rather than taking the correct measures to help the industry, local cadres often try to protect local players by imposing barriers to outside firms.

The central government has much more to do in addition to laying down incentive plans to promote electric cars, as it needs to take a tougher approach against regional trade barriers. Unifying the standards of batteries and charging poles is another urgent task, to ensure that electric cars made in one place can be used across the country.

Only when such initiatives are taken, along with favorable licensing, toll and tax policies, will electric cars stand a chance of gaining more market share in China.

– Contact the writer at [email protected]



EJ Insight writer

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