If you listen to the commentators, you’ll believe that tax breaks and stimulus measures are the sole reason for China’s car boom. It turned the country into the #1 car market in the world. What’s more, the boom continued unabated in 2010. Wonks are worried that the market will crash when the stimuli are withdrawn. Don’t worry. There will be new ones. This time, for electric cars.
By the end of May, a “long-awaited stimulus plan for new energy vehicles is slated to come out,” says China’s officious China Daily.
Details of the final plan are still under study at the Ministry of Finance, but the State Council, China’s cabinet, told their “relevant departments” to get on with it, and to announce implementation details of the incentive plan for new energy vehicles by the end of May.
China Daily expects that the incentives for new energy vehicles will be similar to last year’s pilot project for public sector buyers. All electric car buyers in certain selected cities could obtain incentives of up to 60,000 yuan ($8,800). That’s more than what most of the people in China make in a year.
What qualifies as “new energy” is vague. Definitely EVs. It could include hybrids, it could not.
Li Jun, director of the research and development center of China’s FAW thinks the market will be unimpressed: “Until 2020, most Chinese will still be first-time buyers and may be unwilling to pay more to protect the environment.” Also, Beijing spans 6,487 square miles, 14 times the size of New York City. That, and a look on the map of China may give cause to a serious case of range anxiety.
Speaking of the market (and before some copypaste the usual tulip craze comments:) More or less unobserved by the rest of the world, the white hot China real estate market is going cold. The government wants it that way. Buy a 2nd home, 50 percent down. Buy a third home, no loan. For the whole family. Mortgage interest up. Threats of a real estate tax. Prices dropped 30 – 50 percent over the last week in Beijing. We’ll see whether that affects the car market. My prediction: It won’t.
How could the popping of the housing bubble not affect the car market in China? If people loose a substantial part of their perceived wealth it usually means they spend less.
However, assuming the Chinese carmarket has nowhere to go but up despite the laws of economics the Chinese government is right in it’s desperate attempt to curb the exploding demand for oil that goes with it. Daimler chief executive officer Dieter Zetsche already said it: there is just not enough oil around for “these people”. Obviously “these people”are perfectly willing to do whatever it takes to get their share of dwindling world oil reserves in a world that according to an increasing number of sources is less than 5 years away from peak-oil (but thanks in no small part to China nowhere near it’s peak demand for oil), but clearly the Chinese government is aware that something has to change. Let’s hope the proposed incentive contributes to that change. Because the real and awful truth about cars is that it’s addiction to oil is a problem the world just can’t afford anymore and time is running out to find a solution.