Playing the electric vehicle incentives game

 The Green Highway Published Monday, May. 30, 2011 1:52PM EDTLast updated Monday, May. 30, 2011 1:54PM EDT

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The German government sees problems coming for the country’s all-important automotive industry if it doesn’t keep up with the development of electric vehicles. One newspaper bemoaned the fact, without mentioning China, that the mighty giants like Daimler, VW and BMW are suddenly facing EV competition from “companies nobody has heard of.”

Chancellor Angela Merkel has come to the rescue again. After throwing five billion euros to the auto industry in the form of a very generous old car “scrappage” system, she has now ordered up an additional two billion euros to get a million EVs on German roads by 2020. She figures the subsidies will also help Germany's car industry grab a share of the growing global market for itself.

This will be a subsidy program to industry, not consumers. However if consumers do decide to pay up for more expensive EVs, the government will offer some non-cash sweeteners. For example, you could be exempt from road tax for 10 years or maybe get access to bus lanes and some free parking.

Response in the German media has been mixed and quite entertaining. The mass circulation tabloid daily Bild writes, “The auto industry is still more focused on high-powered sports cars than environmentally friendly runabouts. To change that, intelligent incentives are needed – exactly what the government is proposing. It can only be good for Germany.”

However, the left-wing Tagezeitung takes a different view: “This is the same industry that already bagged five billion through car-scrapping incentives, and is now holding out its hand once again. The same industry which has made record profits through its fossil-fuelled products at the expense of the environment. Now they want to further line their pockets with the switch to electric mobility. An unabashed rip-off.”

While politicians worry about the well-being of the industry at home, German manufacturers who have been investing in China for a decade or more are rushing to launch electric cars there. Volkswagen’s electric cars in China will be branded Kaili and be built with joint-venture partner FAW Group. “The Chinese government has been encouraging joint ventures of foreign car manufacturers to develop indigenous brands,” Volkswagen China spokesman Andreas Hoffbauer told Reuters. China also gives subsidies to buyers of fuel-efficient cars in five of the largest Chinese cities and the manufacturers are targeting them.

General Motors has started making the electric version of its Chevrolet Sail via its venture with SAIC. Nissan, whose JV partner is Dongfeng Motor Group, has signed a deal with the municipal government of Wuhan to jointly promote its Leaf in the central Chinese city. Daimler is developing electric cars in China with BYD, a car and battery maker backed by U.S. billionaire Warren Buffett.

Chinese demand for cars – so far nearly all gasoline-powered – has been so strong that in cities like Beijing, potential customers must enter a licence plate lottery. In an attempt to control the number of vehicles on the traffic-clogged streets, the government requires that you throw your name in the hat and about one in 20 each month win the right to buy licence plates necessary for car purchase. Enterprising Chinese have developed a few scams to get around the lottery but now it seems the system is changing.

Whether Merkel copied the Chinese or vice versa I don’t know, but both now are offering similar non-cash incentives to boost EV demand. In Beijing, it was announced last week that you can skip the lottery and get your plates immediately if you buy a zero-emission electric car.

With subsidies to industry, incentives for consumers, the Chinese and the Germans are both in the EV game to win. Just like the Japanese, South Koreans and Americans.

Michael Vaughan is co-host with Jeremy Cato of Car/Business, which appears Fridays at 8 p.m. on Business News Network and Saturdays at 11:30 a.m. on CTV.

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