After over a decade of development, China's new energy vehicle industry has made remarkable progress. The country has maintained the top position in both production and sales for two consecutive years. From 2011 to the present, cumulative sales of new energy vehicles have exceeded one million units. Meanwhile, several outstanding independent new energy automobile companies have emerged. In the past year alone, 17 new energy car manufacturers achieved global sales exceeding 10,000 units, with nine of them based in China.
**New Energy Buses Face a New Round of Challenges**
In 2016, China sold a total of 129,000 new energy buses, accounting for approximately 25.3% of all new energy vehicle sales. In the passenger car market, new energy buses also held a share of around 23.8%. It can be said that the passenger car segment played a crucial role in the development of China’s new energy vehicle industry. Especially during the early stages of promotion, there were many challenges—from industry preparation to consumer acceptance. It was the new energy bus that first broke through and gained momentum. Today, China leads the world in the number of new energy buses in operation.
China has the largest passenger car market and bus industry globally. The bus sector has long followed an independent innovation path, particularly in the field of clean energy buses, where it holds a leading position worldwide. In terms of technological innovation in the automotive industry, passenger cars have set a strong 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, which is among the best in the world.
The development of new energy buses has also driven the growth of key components such as batteries, motors, and electronic controls, laying the foundation for the overall development of the industry. For instance, in the first half of 2016, batteries used in passenger cars accounted for about 50% of total shipments of power batteries. This means that despite making up only about 25% of new energy vehicle sales, these passenger cars consumed half of the total battery supply. It can be said that the rapid development of China’s power battery industry in recent years has largely benefited from 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 a year-on-year decline. The most direct reason for this is the adjustment of the subsidy policy 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 in 2012, the development of hybrid buses in China was very promising, but a sharp decline occurred after subsidies were cut. This shows how dependent new energy buses are on policy support.
Currently, the new energy bus industry faces new challenges, such as high vehicle costs and expensive parts. Many technical solutions are designed to follow subsidy policies, with insufficient focus on cost-performance ratios. Additionally, some products have quality and safety issues. Addressing the shortcomings of subsidy policy adjustments is urgent. Automobile products (except those for special use) must compete in the market with a reasonable price-to-performance ratio. State subsidies for new energy vehicles should only serve as short-term support for initial R&D and higher production costs before achieving economies of scale.
Recently, Vice Premier Ma Kai emphasized that the national strategy of developing new energy vehicles remains unshakable. The author believes that three major factors underlie the government’s decision: environmental protection, energy security, and industrial upgrading.
First, environmental protection. Severe smog has intensified China’s commitment to promoting 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 transport in cities at or above the prefecture level, with the proportion of new energy buses not less than 35%. Forecasts suggest that by 2020, the total number of city buses will reach 700,000, with more than 50% being new energy buses.
Second, energy security. With the increase in China’s vehicle ownership, oil demand has risen annually. Currently, China’s dependence on foreign oil has reached 65%, expected to rise to 68% by 2020 and 74% by 2030, posing serious energy security risks.
Third, industrial upgrading. China is a large automobile country but not a powerful 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 key parts of traditional vehicles is a serious issue. At present, China’s self-owned brand cars are unable to compete internationally. In 2016, total vehicle exports were only 810,000. China’s auto industry must change its state of being big but not strong.
In the development of new energy vehicles, the passenger car industry has great responsibility, and its impact on the urban atmospheric environment is more significant. Therefore, the development of new energy buses is not a short-term behavior and must be determined.
**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. Document Cai Jian [2016] No. 958 stated that, while 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 would be based on the power battery, taking into account the battery production cost, technological progress, energy consumption levels, driving range, battery/vehicle weight ratio, and battery performance. The subsidy standards would be determined comprehensively by factors such as battery capacity, energy density, charging rate, and fuel economy. The subsidy standards for new energy trucks and special vehicles would be further improved, verified according to the battery power sharing method. Central and local subsidy caps were set separately, with local financial subsidies not exceeding 50% of the central subsidy. Starting from 2019 to 2020, the central and local subsidy standards and caps for various models would 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, the subsidy standard will decrease by 20% starting in 2018. After the introduction of the dual-point policy, the official statement aimed to “improve the energy efficiency of passenger cars and ease energy and environmental pressures.†However, in reality, after the new energy scams, the government decided to continue promoting the development of new energy vehicles and achieve “curve overtaking.†With this policy, management measures have shifted from previous government support to the market. Before 2020, the points system plus 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 of self-innovation in China’s auto industry, with a diverse range of technologies. This year’s government work report proposed encouraging the use of clean energy vehicles, so we should promote the diversification of clean energy vehicle technology. 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 routes and found that most buses operate within 20 kilometers, even in mega-cities like Beijing, they are 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, but China’s technology research and development to industrialization is 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 use in cities. While it is technically possible to run an electric car with four or five hundred kilometers of batteries, it is expensive and energy-consuming, and carbon emissions are not low. Even if China achieves the goal of 300Wh/kg battery cell energy density by 2020, it will still be difficult to match the driving range of fuel vehicles. The future development of batteries is still uncertain. At least at this stage, pure electric vehicles are more suitable for medium and short-term use. Fuel cell vehicles are better suited for long-distance use. There may be overlap in some areas, but overall, there will be a division of labor.
China should actively promote the technological innovation and popularization of fuel cells. It is suggested that starting from long-distance trucks or relatively fixed buses, since the construction of hydrogen stations is challenging. Relatively speaking, fuel cells are easier to start commercialization in commercial vehicles than in passenger cars. Therefore, the author believes that the development of fuel cell vehicles in the bus field may be more suitable for China’s national conditions.
To develop fuel cell buses, we must act quickly. We can learn from the experience of developing natural gas and electric vehicles in China, and accelerate the industrialization process through large-scale demonstrations. For example, choose regions rich in hydrogen resources and conduct demonstrations in 100 districts (or 500 in ten districts) to form 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 are advised to 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 bus ownership. 15 cities have a gasification rate of over 90%, mainly located in western China. There are 11 cities with thousands of LNG buses. Therefore, the development of natural gas vehicles should be fully recognized, especially in areas with abundant natural gas resources in the west. 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 application 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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