Lesson from Debate Over China's Electric Car Incentives: Don't Forget the Drivers

byd-e6-frontAutomakers based in China are investing heavily in electric vehicle technology these days, but some car companies see a troublesome hole in the set of policies China has put together to spur adoption of plug-in cars: direct consumer incentives, such as subsidies or rebates for electric car buyers. The Wall Street Journal reports an emerging debate this morning over these types of incentives, with Warren Buffet-backed BYD Auto (based in China) saying development of the nascent EV market depends on them, and Chinese government officials saying the benefits of such incentives would funnel mostly to the rich.

The debate highlights a point of tension in the effort among a growing number of governments and automakers to spur adoption of electric vehicles, and that’s where to direct carrots and sticks for car buyers, automakers and other EV players.

Carlos Ghosn, chief executive of aspiring EV market-leader Nissan (s NSANY), recently said his company does not have plans to produce electric cars in China, despite plans to sell electric vehicles there by 2012. The Journal’s Norihiko Shirouzu reports that while Nissan has not ruled out producing electric cars in China, Ghosn said the decision will depend on demand for the vehicles, suggesting that the government’s “reluctance (or indecision)” on consumer incentives for electric cars might cost China Nissan, and other electric car makers’, business.

However, the Chinese government has in fact thrown significant weight behind electric vehicles and charging infrastructure, in an effort to make it the world’s leading producer of EVs and eventually also electric buses. As a result, the country, according to forecasts from Pike Research, is on track to lead the electric car charging boom in coming years, accounting for nearly half of the 5 million charge points projected for installation by 2015. And ECOtality, which is working on one of the largest-ever deployments of EV chargers in the U.S., has just formed two joint ventures in China to manufacture, assemble and sell the equipment there.

But on the question of where to direct government support for electric car buyers, China has decided to subsidize the purchases for local governments and taxi fleets, as opposed to individuals. That means electric car prices still remain too high for mass adoption in China. So while China’s auto market is too big to ignore, we still have to wait and see whether (and how soon) a mass EV market emerges there before some electric car makers will put more skin in the game.

Photo: BYD electric e6, courtesy of BYD