After over a decade of development, China's new energy vehicle industry has made remarkable progress. The production and sales of new energy vehicles have consistently ranked first globally for two consecutive years. From 2011 to the present, cumulative sales have surpassed one million units. Meanwhile, several outstanding independent new energy automakers have emerged. Last year, 17 new energy car companies achieved global sales exceeding 10,000 units, with nine of them based in China.
**New Energy Buses Face New Challenges**
In 2016, China sold a total of 129,000 new energy buses, accounting for about 25.3% of all new energy vehicle sales. In the passenger car market, new energy buses also held a share close to 23.8%. It can be said that the passenger car segment played a crucial role in the growth of China’s new energy vehicle industry. Especially during the early stages of promotion, there were numerous challenges from industry preparation to consumer acceptance. The new energy bus was among the first to break through and gain traction. Today, China leads the world in the number of new energy buses on the road.
China possesses the largest passenger car market and bus industry globally. The bus sector has long followed a path of independent innovation, particularly in clean energy buses, where it maintains a leading position worldwide. In terms of technical innovation within the automotive industry, the passenger car sector has set an example, including natural gas buses, LNG buses, pure electric buses, hybrid buses, and plug-in hybrid buses. Currently, the fuel economy of China’s 12-meter hybrid buses reaches 20L/100km, setting a global benchmark.
The development of new energy buses has also driven advancements in key components such as batteries, motors, and control systems, laying the foundation for the broader industry. For example, in the first half of 2016, batteries used in passenger cars accounted for approximately 50% of total shipments of automotive power batteries. This means that passenger cars, which make up about 25% of new energy vehicle sales, consume nearly half of the total battery supply. It is clear that the rapid growth of China’s power battery industry in recent years has been significantly influenced by new energy buses.
**Car Companies Need to Cure Subsidy Policy "Over-Dependence"**
Although the overall trend of China’s new energy vehicles remained positive in the first half of this year, new energy buses entered a downturn, showing negative year-on-year growth. The most direct cause was the adjustment of subsidy policies for new energy buses, including changes in subsidy amounts and the requirement of 30,000 kilometers of mileage. This highlights the heavy reliance of Chinese new energy bus companies on subsidy policies. The author recalls that hybrid buses had strong momentum in 2012, but their performance declined sharply after subsidies were withdrawn. It is evident that new energy buses are highly dependent on policy support.
Currently, the new energy bus industry faces new challenges, such as high vehicle costs and expensive parts. Many technical solutions are developed with subsidies in mind, focusing on cost-performance rather than long-term sustainability. Additionally, some products face quality and safety issues. Addressing these problems requires overcoming the shortcomings of subsidy policy adjustments. Automobiles (except for special-use models) must compete in the market with a reasonable price-to-performance ratio. Government subsidies for new energy vehicles should only serve as short-term support for initial R&D and higher production costs before economies of scale are achieved.
Recently, Vice Premier Ma Kai of the State Council once again emphasized the unshakable national strategy of developing new energy vehicles. The author believes that the country elevated the new energy automobile industry to a national strategy due to three major factors: environmental protection, energy security, and industrial upgrading.
First, environmental protection. Severe smog has strengthened the determination to develop new energy vehicles. Relevant ministries have proposed the goal of clean buses. The “13th Five-Year Plan for the Development of Modern Comprehensive Transportation System†issued by the State Council requires the comprehensive promotion of public transportation cities at or above the prefecture level, with new energy buses making up no less than 35%. Projections indicate that by 2020, the total number of city buses will reach 700,000, with new energy buses accounting for more than 50%.
Second, energy security. With the increase in China’s car ownership, oil demand has risen steadily. Currently, China’s oil dependence stands at 65%, expected to rise to 68% by 2020 and 74% by 2030, raising serious energy security concerns.
Third, industrial upgrading. China is a large auto country but not a strong one. Its R&D capabilities are weak, and self-owned brand passenger cars account for less than 50% of the domestic market, mostly low-end products. The lack of core technology in traditional car components is a significant issue. At present, Chinese self-owned brand cars are not competitive internationally. In 2016, total vehicle exports reached only 810,000 units. The Chinese auto industry must move away from its current state of being big but weak.
In the development of new energy vehicles, the passenger car industry has a great responsibility, and its impact on urban air quality is more pronounced. Therefore, the development of new energy buses is not a short-term effort and must be firmly pursued.
**2018 New Energy Bus Subsidy Policy**
At the end of 2016, the Ministry of Finance issued the Notice on Adjusting the Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles (Cai Jian [2016] No. 958). It stated that under the premise of maintaining the overall stability of the subsidy policy from 2016 to 2020, the subsidy standards for new energy vehicles would be adjusted. For new energy buses, the subsidy is centered on the power battery, taking into account production costs, technological progress, energy consumption levels, driving range, battery/vehicle weight ratio, and battery performance to set access thresholds. Other factors like battery capacity, energy density, charging rate, and fuel economy will also be considered when determining the subsidy amount. The subsidy standards for new energy trucks and special vehicles will be further improved, with subsidies verified according to the battery power sharing method. A separate cap is set for central and local financial subsidies, with local subsidies not exceeding 50% of the central government’s subsidy. Starting from 2019 to 2020, the central and local subsidy standards and caps for various models will be reduced by 20%. Relevant ministries will continue to adjust and improve the policy based on factors such as technological advancement, industrial development, and application scale.
Currently, with the double-point policy in place, subsidies will decrease by 20% from the current standard starting in 2018. After the introduction of the dual-point policy, the official statement emphasizes “improving the energy-saving level of passenger cars and alleviating energy and environmental pressures.†However, in reality, after the subsidy fraud scandal, the government decided to continue promoting the development of new energy vehicles and achieve a “curve overtaking.†With this policy, management measures have shifted from past government support to market-driven approaches. Before 2020, the points system combined with subsidies will be the two main directions in the future.
**New Energy Bus Technology Route Needs Re-Innovation**
New energy buses are the most active area for self-innovation in China’s auto industry, with diverse technology routes. This year’s government work report encourages the use of clean energy vehicles, so we should promote the diversification of clean energy vehicle technologies. Which technical solution is more suitable for future development needs re-evaluation and re-innovation.
**1. Fast Charging and On-Line Charging is More Suitable for Pure Electric Buses**
The author calculated the length of some city bus lines and found that most buses operate within 20 kilometers, even in mega-cities like Beijing, where the distance is within 40 kilometers. Therefore, the vehicle does not need to carry batteries for 300 kilometers. Fast charging and on-line charging are more suitable for pure electric buses.
**2. Fuel Cell Buses are Suitable for Long-Distance Transportation**
International fuel cell vehicle technology is mature, while China’s technology research and industrialization are still far behind. The author believes that the relationship between pure electric vehicles and fuel cells is complementary, each with its own strengths and weaknesses. Based on current battery technology, pure electric vehicles are more suitable for short-distance urban use. While technically possible to run electric cars with batteries for 400–500 kilometers, it is costly and energy-intensive, with high carbon emissions. Even if China achieves a battery cell energy density of 300Wh/kg by 2020, it will still be difficult to match the driving range of fuel vehicles. The future development of batteries remains uncertain. At least for now, pure electric vehicles are better suited for medium- to short-term use. Fuel cell vehicles are more appropriate for long-distance travel. There may be overlap in some areas, but overall, there will be a division of labor.
China should actively promote the technical innovation and popularization of fuel cells. It is suggested to start with long-distance trucks or relatively fixed buses, as hydrogen refueling station infrastructure is challenging to build. Compared to passenger cars, commercial vehicles are easier to start with fuel cells. Therefore, the author believes that the development of fuel cell vehicles in the bus sector may be more suitable for China’s conditions.
To develop fuel cell buses, action must be accelerated. We can learn from the experience of developing natural gas and electric vehicles in China, and move quickly from the research stage to industrialization through scale demonstrations. For example, choose regions rich in hydrogen resources and conduct demonstrations in 100 districts (or 500 in ten districts) to create a certain scale and stimulate industrial development. In the next step, the country may make corresponding arrangements. It is believed that fuel cell buses will soon have opportunities, and qualified bus companies should prepare in advance.
**3. Don’t Relax the Development of Natural Gas Buses**
Natural gas vehicles have the advantage of low life-cycle emissions and are typical clean energy vehicles. After more than 20 years of promotion, China’s natural gas vehicle ownership has reached 5 million, making it the largest in the world. As of 2014, China’s natural gas bus ownership was 180,000, accounting for 35% of total bus ownership. Fifteen cities have a gasification rate of over 90%, mainly located in western China. Eleven cities have thousands of LNG buses. Therefore, the development of natural gas vehicles should be fully recognized, especially in western regions with abundant natural gas resources. Of course, natural gas vehicles will also adopt technological advances to further reduce emissions and energy consumption. The best approach is to develop hybrid natural gas vehicles, i.e., gas-electric hybrid vehicles.
The growth of an emerging industry generally goes through four stages: gestation, introduction, rapid development, and maturity. China’s new energy vehicle industry is still in the introduction phase.
Singapore’s use of the “carbon emission factor†estimation method simplifies complex problems and is worth learning from. The safety of electric vehicles will determine the success or failure of the entire new energy vehicle industry. If ignored, it could eventually lead to disaster. South Korea’s battery industry poses a huge challenge to China’s new energy vehicle battery industry, and we must face this challenge. Promoting the time-sharing leasing model is a very important task that will drive a new revolution in future car consumption.
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