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Box 7.1 Electric vehicle innovation policy across the innovation chain in China
China’s efforts to innovate in electric vehicles (EVs) are a clear example of a governmental attempt to coordinate both supply-side (push) and demand-side (pull) measures in order to achieve specific goals. Policies involve a combination of investments in R&D, the creation of multiple demonstration zones for the purposes of experimentation, policies to spur industrial development, deployment subsidies for manufacturers, favourable tax- and fee-based incentives for consumers, and the provision of necessary infrastructure.
China’s supply-side policies started during its 8th five-year plan (1991–1995), when public R&D funds were first allocated to EV technology. This supply-side support has continued and increased, taking different forms during subsequent five-year plans (Zheng et al., 2012; Hou et al., 2012). Most recently, the Ministry of Science and Technology issued a National Key R&D Programme for EV for 2016–2018, which is the most influential public R&D programme in China. There has been continuous and strengthening complementary supply-side support.
Industrial policy for EVs lagged behind these early investments in R&D, largely because industrial policy dating from the first auto-industry policy in 1994 originally aimed to establish a domestically competitive conventional automobile industry through a joint-venture formation strategy (Gallagher, 2006). In 2009, however, there was a strategic move to the new-energy vehicle industry, which was listed as one of seven strategic emerging industries in 2010, and later as one of 10 key fields in the Made in China 2025 plan. A combination of policy instruments has been applied, including demonstration programmes, finance and taxation measures, and administrative regulations. An influential regulation was recently issued, under which vehicle manufacturers will face compulsory production targets for new-energy vehicles starting in April 2018. If they fail to meet the targets, they will either need to purchase credits from other manufacturers or pay a fine (Lu, 2018). The emphasis on new-energy vehicle is therefore becoming increasingly explicit in industrial policy.
Demand-side policies also commenced in 2009 with subsidies for the purchase of electric vehicles. In 2016, these subsidies were renewed for up to US$8,736 per electric vehicle, although they are scheduled to be phased out by 2020. Other purchase incentives include exemptions from purchase tax, travel tax and import tax for selected EV original equipment manufacturers. In some of the pilot cities, EVs are also exempt from the licence plate lottery system and the restricted land access applied to conventional vehicles (Harrysson et al., 2015; Du and Ouyang, 2017). Moreover, EVs enjoy waived or reduced parking fees and highway tolls in some pilot cities (Gao et al., 2015). The state government has also issued a series of policies and standards for the construction of charging infrastructure (aiming to build 12,000 charging stations by 2020) and many pilot cities also employ subsidies (Du and Ouyang, 2017; Lu, 2018).
Alongside these supporting policies, clear objectives for industry development and market creation have been set out. By 2020, EV production capacity (including plug-in hybrids) will reach two million, and EV stocks will exceed five million. Moreover, the fuel efficiency standard for average fuel consumption of all passenger cars produced in 2020 is set at 5 litres/100km, down from 6.65 litres/100km in 2015 (The State Council, 2012; Ministry of Industry and Information Technology, 2016).
With this constellation of policies rolled out from 1991, the Chinese Government has pushed and pulled electric vehicles into the marketplace. China’s stock of EVs grew at an average rate of 69 percent between 2013 and 2017, and the country was home to almost 40 percent of the world’s EVs in 2017.
Table 7.1: China’s EV (including plug-in hybrid) stock from 2009 to 2017 (in thousands) 2009 2010 2011 2012 2013 2014 2015 2016 2017
China World China’s share Source: IEA, 2018b 0.5 7 7% 2 14 14% 7 61 11% 17 179 9% 32 381 8% 105 704 15% 313 1239 25% 649 1982 33% 1228 3109 39%
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