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Published on March 24th, 2016 | by James Ayre


China Will Phase Out EV Subsidies, Shift Toward Funding Tech R&D

March 24th, 2016 by  

Originally published on EV Obsession.

Following widespread reports of possible electric vehicle subsidy fraud in the country, the Chinese Finance Ministry announced back in January that it would not be extending electric vehicle subsidies beyond 2021. And that it also would begin slowly phasing them out with a 20% cut over the next 2 years, and a 40% cut between 2019 and 2020.

During a recent State Council meeting in the country, Premier Li Keqiang revealed his plan for the funding that would otherwise be going towards electric vehicle (EV) subsidies to be shifted towards technological research and development, and sales target incentives.


In particular, the country’s policy-makers seem keen to support battery research and development — an area where the country is already a major player, but could potentially capture a much larger market share.

Green Car Reports provides more:

Chinese officials have long dreamed of the country becoming a leader in electric-car technology. And China has a natural advantage in its large deposits of rare earth metals, which are used in battery cells. But China’s domestic car industry isn’t as advanced as those of other countries; most large Chinese carmakers still operate under partnerships with foreign firms. Potentially helping the domestic industry is a proposal to encourage “public institutions” and transit fleets to adopt electric vehicles.

The speech from Premier Li also included a proposal to raise the public-institution fleet electric vehicle mandate to 50%, up from 30%. Such a move would of course, even just on its own, notably increase electric vehicle demand, given the enormous size and population of the country.

Reprinted with permission.


About the Author

James Ayre's background is predominantly in geopolitics and history, but he has an obsessive interest in pretty much everything. After an early life spent in the Imperial Free City of Dortmund, James followed the river Ruhr to Cofbuokheim, where he attended the University of Astnide. And where he also briefly considered entering the coal mining business. He currently writes for a living, on a broad variety of subjects, ranging from science, to politics, to military history, to renewable energy. You can follow his work on Google+.

  • ROBwithaB

    Federal subsidies can be difficult to manage. Bureaucratic nightmare, with lots of opportunities to cheat the system
    Local subsidies make more sense, as they are easier to police and can be targeted to areas with the worst air quality.

    • Leaves in the wind

      Yeah, but local/provincial government subsidies are harder to supervise per say by the central government and the problem of corruption will still persist (Xi Jinping’s anti-corruption campaign also made large local govt spending even less feasible).

  • Leaves in the wind

    Well, there are many interesting EV concepts coming out of China nowadays. But I won’t deny that many SOEs and private automobile companies have been abusing the system by making low-grade not road-worthy NEVs or EVs just to get the generous government subsidies.

    I wonder how it would affect the more dedicated companies like Build your Dreams (BYD)

  • JamesWimberley

    An announced taper of the subsidy is good policy, and allows businesses to plan rationally. But what are “targeted sales incentives”?

  • Ivor O’Connor

    And China has a natural advantage in its large deposits of rare earth metals, which are used in battery cells.

    Last I knew rare earth elements were not needed in Tesla and most other batteries. Or in wind turbines. Am I mistaken or is this Green Cars Report writer either green around the ears or an idiot?

    And will the Chinese government be doing anything helpful to allow companies like Tesla to compete? Or will all R&D just go to Chinese companies? (Why can’t the USA do the equivalent?!)

    • JamesWimberley

      That’s one of the advantages of the shift in policy. All countries discriminate in research funding, though we are seeing a welcome trend to more international collaboration.

      The great Longitude Prize offered by the British Parliament round 1710, eventually won by Harrison’s marine chronometer, was not limited to nationals. The Swiss mathematician Leonhard Euler won a modest award for a contribution that improved the alternative astronomical method.

    • Jens Stubbe

      Cobalt is a strategic metal and used excessively by Tesla and everybody else producing Lithium Ion batteries – and as a matter of fact it is the most expensive raw material in the battery.

      This fast query gives you the facts about the problem https://www.google.dk/?gws_rd=ssl#q=cobalt+shortage

      Clearly the approximately 190 Giga Factories needed to produce enough batteries for the annual production of just cars cannot all be based upon Cobalt and it is inconceivable that Lithium Ion can be used for storage as well, so the EV revolution depends upon the discovery of other battery chemistries better suited for volume production.

      • Ivor O’Connor

        Nonsense. No limits on either product. Except if you listen to the wall street journal, fox news, or directly from the koch brothers.

        • Jens Stubbe

          I think you are well aware that I share no views with the list of thugs you have listed.

          Your theory of sufficient supplies of Cobalt will require more than I think that you are aware of. Cobalt is not mined selectively but rather as a byproduct from Nickel and copper mining.

          Here on this list of the abundance of metals you can see that Cobalt is relatively scarce. https://en.wikipedia.org/wiki/Abundance_of_elements_in_Earth%27s_crust

          I trust you do not consider green tech media among the thugs that you imply I belong to. http://www.greentechmedia.com/articles/read/Why-Lithium-Isnt-the-Big-Worry-for-Li-ion

          For now, Tesla is definitely not worried about lithium availability, Georgeson confirmed. “There are more than enough reserves of lithium world-wide to serve the growth of the battery markets, including Tesla’s projected needs,” she said. “Even if we wanted to build 10 or 20 Gigafactories, we would not have to search beyond the known reserves that can be economically mined.”

          Tesla quite rightly sees no concerns until beyond 20 Giga Factories, which implies that 190 Giga Factories spewing out batteries for cars will be a tall order for the mining industries to keep up with.

          So far the sea mining industry is limited to Magnesium, Sodium Chloride and freshwater though research suggest that while it is certainly possible to produce nearly all water soluble minerals in great quantities the cost is not comparable with traditional mining.

          • Jens Stubbe

            I forgot to mention that by 2020 the Tesla Giga Factory will represent 10% of annual Cobalt demand if the battery technology has not progresses and provided Tesla is not more successful than planned. 190 Giga Factories will consume increase Cobalt demand to 19 times the current demand and outpace the current production capacity by several factors.

            I am however not particularly worried that there will be battery shortage or big problems with getting batteries down in price. The main reason is that there are several alternative Chemistries for batteries.

          • Ivor O’Connor

            The GTM link was much like an EIA link.

            However the GTM link did say cobalt would not be a concern until the distant future. If even then. And there are many other countries, some of which speak English, that have large untapped supplies.

            The Lithium is similar. Tesla opened its gigafactory next to a lithium mine. He even got Nevada to build him a direct path to it. America has potentially more lithium than any other country in the world. But there are other mines throughout the world and we will probably see many “gigafactories” built next to each of them.

            Battery tech is like oil tech was 100 years ago. People then were saying oil would only last a while.

          • Jens Stubbe

            No Ivor battery tech is not like oil.

            You cannot ignore that Tesla style batteries weigh 540 kg for a P85 and between 10% and 20% is Cobalt and that Tesla expect to demand 10% of global production once the Giga Factory is up and running and consequently expect that scaling beyond something like the 10-20 Giga Factory might pose problems.

            Also you cannot ignore that global production of Cobalt traditionally has been linked to Nickel and Copper production and that sea mining as the major alternative is still in research phase with unknown economics.

            All this supports my original claim that Tesla style batteries are not possible for 190 Giga Factories which is what is required to substitute all new cars with EV’s.

            Fortunately many battery chemistries whereof quite a few does not require Cobalt are being developed so when the time comes where Cobalt is a real constraint it might not be needed anyhow.

            Ps. Oil will only last a while not because it is not abundant in supply but simply because it will be outcompeted by cheaper Synfuel within a short timeframe.

          • Jens Stubbe

            Another reason not to base EV batteries on Cobalt is that Cobalt is important for strong magnets and therefore also insofar wind turbines that provide the cheapest renewable energy. http://www.hngn.com/articles/87649/20150427/breakthrough-magnetic-alloy-lead-cheaper-cars-wind-turbines.htm
            You can make wind turbines totally REE free and without any Cobalt what so ever.

            Tesla and others should focus upon the renewable production of electricity as much as they focus upon accessing raw materials for sustained if not sustainable growth.

            The numbers I have dug up suggests that battery chemistry once EV’s moves into percentages of the new car market and long before it can move into heavier vehicles has to get off supply restricted materials.

          • Ivor O’Connor

            Jens, perhaps we have a language problem here.

            For instance when you say “synfuel” everybody who speaks English thinks this: https://en.wikipedia.org/wiki/Synthetic_fuel However I feel when you say synfuel are thinking of making hydrogen or methane from excess electricity generated by solar and wind. So please define what you mean as “synfuel”. If it is the dirty American definition I’m against it.

            I’m glad you no longer are pushing the idea lithium is a problem. Now for cobalt. Sure it is convenient for us to process the trash dirt that had other materials in it like gold and copper to find cobalt. However when cobalt becomes an issue we’ll start mining just for cobalt. I suspect if you are worried about getting it from Africa or Asia. But we can get cobalt from Australia. I hear Austraila may soon have a lot of miners looking for jobs. If cobalt becomes expensive then we’ll probably start actually looking for it across the planet. Maybe in time, say 50 to 100 years, we’ll take the topic more seriously.

          • Jens Stubbe

            Ok to the confusion I am interested in pure Synfuels derived from electricity and excess CO2. As for the Lithium issue I think I never have indicated any belief in Lithium shortage. To the contrary we in Northern Europe lives on top of a dried out sea and beneath the Mediterranean Sea there is another huge dried out Sea. I think the Cobalt issue will arrive sooner and I do not think the dedicated effort to mine Cobalt is the answer I think the preferred battery technology is yet to come.

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