China Considers More Electric-Car Incentives, Official Says

Apr 02, 2014 8:33 pm ET

(Updates with U.S. closing share price in sixth paragraph.)

April 2 (Bloomberg) -- China may exempt electric-car buyers from paying purchase taxes as part of expanded state measures to bolster sales of such vehicles after past incentives failed to spur demand, Vice Premier Ma Kai said.

The government may cut or waive the 10 percent auto- purchase tax for new-energy vehicles -- China’s term for electric cars, plug-in hybrids and fuel-cell vehicles -- and slow down the reduction of government subsidies beyond 2015, according to comments from Vice Premier Ma Kai posted on the Chinaev.org website. Ma also urged local governments to help companies develop electric-car rental services.

Shares of BYD Co., China’s biggest maker of electric cars, rose in Hong Kong trading amid mounting signs the government is stepping up efforts to fight the thickening pollution that’s choking its people. Last month, Premier Li Keqiang declared war on smog and Hangzhou became the sixth Chinese city to impose restrictions on cars.

“New-energy vehicles are important for China’s energy dependency, so the government will devote more resources into promoting them,” said Harry Chen, a Shenzhen-based analyst with Guotai Junan Securities Co. “Reducing or exempting the purchase tax will certainly give buyers more reason to buy such cars as it’s quite a lot of money.”

BYD, Kandi

BYD, maker of the all-electric E6 car and K9 bus, rose 1.7 percent to HK$49.30 in Hong Kong trading, outperforming the benchmark Hang Seng Index.

Kandi Technologies Group Inc., which offers electric- vehicle rental services with Geely Automobile Holdings Ltd. in Hangzhou, rose 4.9 percent today in New York. The shares have risen 41 percent in Nasdaq trading this year after nearly tripling in 2013.

Five years after China began promoting new-energy vehicles, fewer than 70,000 are on its roads, lagging behind the central government’s target of reaching 500,000 by 2015. Ma blamed the wavering commitment of local authorities and slow pace of building charging stations, according to the statement. The development of such vehicles carries grave importance for helping ease China’s energy dependency, combating air pollution and nurturing the local auto industry, he said.

Other measures under study include using proceeds from emissions surcharges toward financing electric vehicles, and continuing to pay public-transportation companies fuel subsidies even after they switch to hybrid buses, Ma said.

His comments elaborate on past comments made by the government. In February, China said it would extend more subsidies for electric vehicles than previously announced.

Subsidies for 2014 will be cut by 5 percent, instead of the previously planned 10 percent, and decreased by 10 percent in 2015, instead of 20 percent, according to the latest government announcement in February. Funding will continue beyond Dec. 31, 2015, with details to be announced, according to the statement.

--With assistance from Alan Ohnsman in Los Angeles.