See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/262921506

China’s electric vehicle subsidy scheme: Rationale and impacts

Article  in  Energy Policy · October 2014

DOI: 10.1016/j.enpol.2014.05.022

CITATIONS READS

171 2,458

5 authors, including:

Han Hao Xunmin Ou

Tsinghua University Tsinghua University
118 PUBLICATIONS   3,236 CITATIONS    89 PUBLICATIONS   2,629 CITATIONS   

SEE PROFILE SEE PROFILE

Jiuyu Du Hewu Wang

Tsinghua University Tsinghua University
89 PUBLICATIONS   1,581 CITATIONS    120 PUBLICATIONS   3,036 CITATIONS   

SEE PROFILE SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Combustion control for compression ignition engines View project

China Automotive Energy Outlook View project

All content following this page was uploaded by Hewu Wang on 03 April 2020.

The user has requested enhancement of the downloaded file.

 Energy Policy 73 (2014) 722–732

Contents lists available at ScienceDirect

Energy Policy
journal homepage: www.elsevier.com/locate/enpol

China’s electric vehicle subsidy scheme: Rationale and impacts

Han Hao a,c,d, Xunmin Ou b,c, Jiuyu Du a,c, Hewu Wang a,c, Minggao Ouyang a,c,n
a
State Key Laboratory of Automotive Safety and Energy, Tsinghua University, Beijing 100084, China
b
Institute of Energy, Environment and Economy (3E), Tsinghua University, Beijing 100084, China
c
China Automotive Energy Research Center, Tsinghua University, Beijing 100084, China
d
Energy Policy Institute at Chicago, University of Chicago, Chicago, IL 60616, USA

H I G H L I G H T S

China’s phase I and phase II electric vehicle subsidy schemes were reviewed.

Major electric vehicle models in China’s vehicle market were reviewed.

The ownership costs of five defining electric passenger vehicle models were compared.

Policies to promote electric vehicle deployment in China were discussed.

art ic l e i nf o a b s t r a c t

Article history: To promote the market penetration of electric vehicles (EV), China launched the Electric Vehicle Subsidy
Received 27 December 2013 Scheme (EVSS) in Jan 2009, followed by an update in Sep 2013, which we named phase I and phase II
Received in revised form EVSS, respectively. In this paper, we presented the rationale of China’s two-phase EVSS and estimated
1 April 2014
their impacts on EV market penetration, with a focus on the ownership cost analysis of battery electric
Accepted 13 May 2014
Available online 6 June 2014
passenger vehicles (BEPV). Based on the ownership cost comparison of five defining BEPV models and
their counterpart conventional passenger vehicle (CPV) models, we concluded that in the short term,
Keywords: especially before 2015, China’s EVSS is very necessary for BEPVs to be cost competitive compared with
Electric vehicle CPVs. The transition from phase I to phase II EVSS will generally reduce subsidy intensity, thus resulting
Passenger vehicle in temporary rise of BEPV ownership cost. However, with the decrease of BEPV manufacturing cost, the
China
ownership cost of BEPV is projected to decrease despite of the phase-out mechanism under phase II
Subsidy
EVSS. In the mid term of around 2015–2020, BEPV could become less or not reliant on subsidy to
Ownership cost
maintain cost competitiveness. However, given the performance disadvantages of BEPV, especially the
limited electric range, China’s current EVSS is not sufficient for the BEPV market to take off. Technology
improvement associated with battery cost reduction has to play an essential role in starting up China’s
BEPV market.
& 2014 Elsevier Ltd. All rights reserved.

1. Introduction

China is facing severe environmental and climate challenges

Abbreviations: AMT, automated mechanical transmission; AT, automatic trans-
mission; BEPV, battery electric passenger vehicle; BEV, battery electric vehicle; CPV,
conventional passenger vehicle; CVT, continuously variable transmission; EV,
electric vehicle; EVSS, electric vehicle subsidy scheme; FCEV, fuel cell electric
vehicle; FCR, fuel consumption rate; FEVSS, fuel-efficient vehicle subsidy scheme;
GHG, greenhouse gas; HEV, hybrid electric vehicle; MSRP, manufacturer suggested
retail price; NEDC, new European driving cycle; O&M, operation and maintenance;
PHEV, plug-in hybrid electric vehicle; PHEPV, plug-in hybrid electric passenger
vehicle; PV, passenger vehicle; SPM, subsidy phase-out mechanism; SPV, special
purpose vehicle
n
Corresponding author at: State Key Laboratory of Automotive Safety and
Energy, Tsinghua University, Beijing 100084, China. Tel.: þ86 10 62783400;
fax: þ86 10 62785706.
E-mail address: ouymg@tsinghua.edu.cn (M. Ouyang).
(Guan et al., 2008). Road transport emits around 8% of China’s total
energy related greenhouse gas (GHG) emissions (IEA, 2013) and
the share is increasing very fast with the boom of vehicle stock
(Hao et al., 2011d). As EVs offer the potentials to address oil
security, air pollution and climate change, China took EV deploy-
ment as an essential strategy to tackle local pollution and GHG
emissions issues. In the “Energy Saving and New Energy Vehicle
Industry planning” issued in 2012, the accumulated sales of
battery electric vehicle (BEV) and plug-in hybrid electric vehicles
(PHEV) were projected to reach 0.5 million in 2015 and 5 million
in 2020. To accomplish this target, China has launched compre-
hensive programs and policies to promote EV market penetration.

http://dx.doi.org/10.1016/j.enpol.2014.05.022
0301-4215/& 2014 Elsevier Ltd. All rights reserved.
 H. Hao et al. / Energy Policy 73 (2014) 722–732
Among all the policy instruments, vehicle purchase subsidy plays
an essential part in starting up China’s EV market.
Vehicle purchase incentives for EVs, notably subsidies and tax
credits, have been adopted in many countries. In the U.S., activated
by the Energy Policy Act of 2005, a maximum of $3400 tax credit
was provided to hybrid electric vehicle (HEV) purchase between
2006 and 2010. The incentive for PHEV and BEV purchase started
in 2010, which offers $2500–$7500 tax credit to PHEV and BEV
purchase depending on vehicle’s battery capacity (Internal
Revenue Service, 2011). In Japan, the “Green Vehicle Purchasing
Promotion Measures”, which was passed by the Japanese Diet in
2009, provides purchase of environmentally friendly vehicles with
up to 100,000 Yen subsidy and a combination of tax reduction and
exemption incentives (JAMA, 2010). Under the “Clean Energy”
subsidy program, EV purchase is eligible for a maximum of
850,000 Yen subsidy in 2013. As the world’s most determined
EV propellant, China launched the Electric Vehicle Subsidy
Scheme (EVSS) in Jan 2009, followed by an update in Sep 2013,
which we named phase I and phase II EVSS, respectively. The two-
phase subsidy scheme specifies the subsidy duration, scope,
standard, phase-out mechanism and pilot cities for both public
and private EV purchase. It is one of the world’s most compre-
hensive and incentive-strong subsidy schemes.
Vehicle purchase incentive can pose a wide range of impacts on
vehicle market. Existing studies have evaluated the impacts of
vehicle purchase incentive on many aspects, with a focus on
consumer purchase behavior and vehicle market penetration.
These studies typically employ an agent-based consumer choice
model to simulate the effect of cost and other non-cost factors on
vehicle choice. Mueller and de Haan (2009) established a two-
stage model of individual decision process to estimate the effect of
energy-efficiency feebates on consumer choice of new cars, con-
cluding that consumers can have different reactions to feebates,
either switching to a smaller car or a more efficient car with the
same class. Eppstein et al. (2011) developed a spatially explicit
agent-based vehicle consumer choice model to study the various
influences, including policy incentives, on PHEV market penetra-
tion. Their study indicates that a ready-estimate of ownership cost
to consumers can significantly enhance the market penetration of
PHEVs. Al-Alawi and Bradley (2013) examined existing EV market
modeling studies, calling for an improved interface with federal
and state policy and its effect on automotive markets. Several
studies discussed vehicle subsidy in a strategy framework. Yang
(2010) argued that subsidy alone is not sufficient for the commer-
cialization of electric vehicles, while limiting conventional vehicles
could be more effective. Skerlos and Winebrake (2010) argued that
a consumer income and location of purchase specific subsidy
policy would yield higher social benefits. Ross Morrow et al.
(2010) compared the policies of fuel tax, fuel economy standard
and vehicle purchase tax credit, concluding that vehicle purchase
tax credit is expensive and inefficient at reducing emissions.
As vehicle ownership cost is the essential factor affecting
vehicle choice, many studies have focused on the evaluation of
vehicle ownership cost. These studies typically include a set of
computer simulation based or real-world demonstration based
fuel economy and cost estimates for alternative vehicles. Plotkin
and Singh (2009) compared the ownership costs of several
alternative vehicle powertrains for light duty vehicles, concluding
that advanced CV and HEV powertrains are likely to offer better
cost effectiveness for fuel saving. Burke and Zhao (2012), based on
similar approach, projected the ownership costs of alternative
vehicle powertrains through 2030, with an evaluation of the
impact of battery cost uncertainty. Peterson and Michalek (2013)
estimated the cost effectiveness of PHEV battery capacity, finding
that low-capacity PHEV and HEV are the more favorable solutions.
Several studies further investigated the effect of alternative vehicle
723
penetration on the energy consumption and emissions of the
whole vehicle fleet at a macro level (Al-Ghandoor, 2013;
Al-Ghandoor et al., 2012; Geng et al., 2013; Hang et al., 2013;
Hao et al., 2014a, 2011b, 2010, 2012; Ou et al., 2012; Zhu, 2010). In
general, existing studies have established a mature framework for
vehicle ownership cost analysis. However, there is a lack of studies
on vehicle purchase subsidy and ownership cost in China’s con-
text. Although China is providing intensity subsidy to EV purchase,
their effect on consumer’s purchase behavior is unclear. In this
study, based on a comprehensive review of China’s EVSS and
market available EV models, we estimated the impact of EVSS on
consumer’s vehicle ownership cost, with the purpose of providing
a thorough vision into the economic aspects of China’s EVSS.
The following sections of this paper are organized as below.
Section 2 investigates the rationale of China’s phase I and phase II
EVSS in terms of private purchase subsidy and public purchase
subsidy, respectively. Section 3 examines the available EV models
in China’s vehicle market and their qualified subsidy under EVSS,
with a brief discussion of the impacts of EVSS update on vehicle
manufactures. Section 4 estimates the impacts of EVSS on vehicle
ownership costs based on the comparison between China’s five
defining BEPV modals and their counterpart CPV models. Section 5
presents the policy implication derived from the ownership cost
analysis. Section 6 draws conclusions from the whole study.
2. Rationale of China’s EV subsidy schemes
Table 1 presents a comprehensive description of China’s phase I
and phase II EVSS. In this section, we described China’s EVSS in the
order of subsidy duration, scope, standard, phase-out mechanism
and pilot cities.
2.1. Subsidy duration
The phase I EVSS started in 2009. In the beginning, subsidy was
only available to public procurement, mostly transit buses and taxis.
In 2010, subsidy was extended to include private purchase. The phase
I EVSS ended at the end of 2012. After nine months of policy absence,
the phase II EVSS was announced in Sep 2013 and will continue
through 2015. It covers both public and private purchase.
2.2. Subsidy scope
Under phase I EVSS, the subsidy for public procurement covers
all categories of EVs (HEV, PHEV, BEV and FCEV). The subsidy for
private purchase covers only PHEV and BEV. HEV is considered as
fuel-efficient vehicle and is subsidized under Fuel-Efficient Vehicle
Subsidy Scheme (FEVSS). But the subsidy intensity of FEVSS
(¥3000 per vehicle) is far lower than EVSS (Up to ¥60,000 per
vehicle). Under phase II EVSS, subsidy covers PHEV, BEV and FCEV.
Both public and private purchases of HEVs are excluded from the
subsidy scheme. As nearly half of subsidized public vehicles during
phase I EVSS are HEVs, the exclusion of HEV in Phase II EVSS will
greatly curtail the subsidy benefits. There has been great con-
troversy over whether HEV should be included in EVSS, as many
people believe HEV should be given equal priority to PHEV and
BEV. This subsidy scope partially reflects China’s strategy on EV
development, which place more priority on pure electric driving
technologies.
2.3. Subsidy standard
2.3.1. Private purchase
Under phase I EVSS, subsidies for private purchase of PHEPV
and BEPV are based on vehicle’s battery capacity, with subsidy
724 H. Hao et al. / Energy Policy 73 (2014) 722–732

Table 1
China’s phase I and phase II EVSS.

a
Phase I Phase II

Target market Public Private b Public and private

Subsidy duration 2009–2012 2010–2012 2013–2015
Subsidy scope HEV, PHEV, BEV, FCEV PHEV, BEV PHEV, BEV, FCEV
Subsidy standard HEV PV Up to ¥50,000
Bus Up to ¥420,000 (L Z 10)
f
PHEV PV Up to ¥50,000 ¥3000/kW h ¥35,000 (RZ 50)
Bus Up to ¥420,000 (L Z 10) ¥250,000 (L Z 10)
g
BEV PV ¥60,000 ¥3000/kW h ¥35,000 (80 r Ro 150)
¥50,000 (150r Ro 250)
¥60,000 (RZ 250)
Bus ¥500,000 (L Z 10) ¥300,000 (6 r L o8)
¥400,000 (8 r L o10)
¥500,000 (L Z10) c
SPV ¥2000/kW h h
FCEV PV ¥250,000 ¥200,000
Bus ¥600,000 (L Z 10) ¥500,000
Phase-out mechanism Not mentioned Mentioned but not specified 10% Reduction in 2014
20% Reduction in 2015 d
e
Pilot cities 25 Cities 6 Cities 28 Cities and regions

a
L denotes vehicle length; R denotes electric range; PV denotes passenger vehicle; SPV denotes special purpose vehicle.
b
Lead–acid battery powered passenger vehicles are not included in the subsidy scheme.
c
The subsidy amount for super-capacitor and Lithium Titanate battery powered electric buses is fixed to ¥150,000.
d
Battery electric and plug-in hybrid electric buses are not included in the phase-out mechanism.
e
Subsidy for hybrid electric buses was extended to all the cities in China in 2012.
f
Maximum subsidy amount limited to ¥50,000.
g
Maximum subsidy amount limited to ¥60,000.
h
Maximum subsidy amount limited to ¥150,000.

intensity of ¥3000/kW h. The maximum subsidy amount for
PHEPV and BEPV are limited to ¥50,000 and ¥60,000. Phase I
EVSS requires the battery capacities of qualified PHEPV and BEPV
to be higher than 10 kW h and 15 kW h.
Under phase II EVSS, subsidies for private purchase of PHEPV
and BEPV are based on vehicle’s electric range. For PHEPV, the
subsidy amount is fixed to ¥35,000 for all vehicles with electric
range of 80 km or higher. For BEPV, there are three subsidy levels.
Vehicles with electric ranges of 250 km or higher, 150–250 km and
80–150 km are qualified for ¥60,000, ¥50,000 and ¥35,000 sub-
sidies, respectively.
2.3.2. Public procurement
Public vehicles qualified for subsidy include transit buses, taxis,
government, postal service and refuse vehicle. Under phase I EVSS,
around half of subsidized public vehicles are transit buses. In this
section, we focused our discussion on transit buses.
Under phase I EVSS, hybrid electric buses and plug-in hybrid
electric buses are qualified for ¥200,000–¥420,000 subsidy,
depending on the bus’s maximum electric power ratio and fuel
saving ratio. The testing procedures of maximum electric power
ratio and fuel saving ratio are specified in the “Outline for testing
the maximum electric power ratio and fuel saving ratio of energy-
saving and new energy vehicles” (CVTSC, 2009). Generally, the
maximum electric power ratio is obtained through dividing the
maximum motor power by the sum of motor power and engine
power. The fuel saving ratio is obtained by comparing the fuel
consumption rate of hybrid electric buses with their counterpart
conventional bus models. Subsidies for battery electric buses and
fuel cell electric buses are fixed to ¥500,000 and ¥600,000,
respectively. All subsidized buses are required to be longer than
10 m.
Under phase II EVSS, hybrid electric buses are excluded from
the subsidy scheme. Plug-in hybrid electric buses with length of
10 m or longer are qualified for ¥250,000 subsidy. Subsidy for
battery electric buses is categorized into three levels. Battery
electric buses with length of 10 m or longer, 8–10 m and 6–8 m
are qualified for ¥500,000, ¥400,000 and ¥300,000 subsidies,
respectively. The subsidy for fuel cell electric buses is fixed to
¥500,000.
2.4. The subsidy phase-out mechanism
For both two phases of EVSS, there are subsidy phase-out
mechanisms (SPM). The SPM specifies the condition under which
subsidy should be reduced. Under phase I EVSS, SPM is only
effective for private purchase. It requires that once the sales of
PHEPV or BEPV from one vehicle manufacture exceed 50,000,
subsidy for EVs of this manufacture should be reduced. The
reduction range is not specified. Actually, as no single vehicle
manufacturer has sold more than 50,000 PHEPVs or BEPVs, the
SPM has never been triggered during phase I EVSS. Under phase II
EVSS, the SPM requires that the subsidy for all EVs should be
reduced by 10% and 20% in 2014 and 2015, except for plug-in
hybrid electric and battery electric transit buses. The SPM reflects
the government’s expectation of EV cost reduction with higher
level of commercialization.
2.5. Pilot cities
China’s EVSS is implemented in selected cities and regions.
Only EV purchases in the selected places are qualified for subsidy.
Fig. 1 presents the cities and regions involved in phase I and
phase II EVSS.
Thirteen cities were selected in 2009 as the first batch of pilot
cites to implement phase I EVSS for public procurement, including
Beijing, Shanghai, Chongqing, Changchun, Dalian, Hangzhou, Jinan,
Wuhan, Shenzhen, Hefei, Changsha, Kunming and Nanchang. The
second batch of 7 cities and third batch of 5 cities were included
in phase I EVSS for public procurement in 2010, including Tianjin,
Haikou, Zhengzhou, Xiamen, Suzhou, Tangshan, Guangzhou,
Shenyang, Chengdu, Hohhot, Nantong and Xiangfan. The subsidy
 H. Hao et al. / Energy Policy 73 (2014) 722–732 725

Involved in phase I EVSS for public procurement

Involved in phase I EVSS for public and private purchase
Cities involved in phase II EVSS
Regions involved in phase II EVSS

Fig. 1. Cities and regions involved in phase I and phase II EVSS. Note: Some parts of China’s land area are not shown in this figure.

Table 2
Local matching EV subsidy schemes for private purchase under phase I EVSS.

City Matching subsidy Non-subsidy incentive

Criteria PHEPV BEPV

Beijing Battery capacity ¥3000/kW h (max: ¥50,000) ¥3000/kW h (max: ¥60,000) License plate lottery exemption
Shanghai Vehicle unit ¥30,000/vehicle ¥40,000/vehicle Free license plate
Hangzhou Battery capacity in excess of 10 kW h ¥2000/kW h (max: ¥30,000) ¥3000/kW h (max: ¥60,000)
for PHEPV and 20 kW h for BEPV
Shenzhen Vehicle unit Up to ¥30,000 Up to ¥60,000
Hefei Battery capacity ¥1000/kW h (max: ¥20,000) ¥1000/kW h (max: ¥20,000)
Changchun Vehicle price 20% of vehicle price (max: ¥40,000) 20% of vehicle price (max: ¥45,000) EVs are not subject to vehicle
use restriction

for hybrid electric transit buses was extended to be nationwide
available in late 2012.
The phase I EVSS for private purchase was implemented in
6 cities including Beijing, Shanghai, Hangzhou, Shenzhen, Hefei
and Changchun. These six cities were required to provide match-
ing subsidy in additional to the subsidy from central government.
Table 2 presents the local matching EV subsidy schemes. The local
subsidy schemes are diverse in terms of subsidy criteria and
amount. The maximum subsidy for BEPV purchase in Beijing,
Hangzhou and Shenzhen is ¥60,000, which is the same as the
national subsidy amount. That is, BEPV purchase in these three
cities can be qualified for as high as ¥120,000 subsidy per vehicle.
Besides matching subsidy, there are also some non-subsidy incen-
tives for PHEPV and BEPV purchase. For example, in Beijing and
Shanghai, where the number of vehicle license plates issued per
month is under strict control, PHEPV and BEPV are qualified for
dedicated and free license plates (the policy in Beijing is tempor-
ary and might be canceled in 2014). In Changchun, where vehicle
use is restricted in certain regions, PHEPV and BEPV are not
subject to vehicle use restrictions.
28 cities and regions have been included in phase II EVSS and the
scope might be further expanded. Priority was given to regions with
severe particle matter pollutions. The 28 cities and regions are
Beijing, Tianjin, Taiyuan, Jincheng, Dalian, Shanghai, Ningbo, Hefei,
Wuhu, Qingdao, Zhengzhou, Xinxiang, Wuhan, Xiangyang, Chang-
Zhu-Tan regions, Guangzhou, Shenzhen, Haikou, Chengdu, Chongq-
ing, Kunming, Xi’an, Lanzhou, Hebei city group, Zhejiang city group,
Fujian city group, Jiangxi city group and Guangdong city group.
3. EV models and their qualified subsidies
3.1. Battery electric passenger vehicles
Table 3 summarizes the major BEPV models currently available
in China’s vehicle market. For each vehicle model, its manufacturer
726 H. Hao et al. / Energy Policy 73 (2014) 722–732

Table 3
Major available BEPV models in China’s vehicle market.

Manufacturer Modelc MSRP (Yuan) Curb weight Battery capacity Electric range (km) b
Qualified subsidy Available Sales in
(kg) (kW h) since 2012
Phase Phase
I II

BYD E6 369,800 2380 60 300 60,000 60,000 Oct, 2011 2091

ZOTYE 5008EV 208,000 1350 32 160 60,000 50,000 Jul, 2010 987
M300EV 268,000 1705 35.2 160 60,000 50,000 Apr, 2010 134
CHERY M1EV 169,800 1060 16 130 (30 kph constant 48,000 35,000 Nov, 2010 90
speed)
a
QQ3EV 50,800 1050 9 120 (30 kph constant w/o w/o Sep, 2010 5305
speed)
JAC iEV3 158,000 1260 19 180 (60 kph constant 57,000 35,000 Sep, 2012 2485
speed)
LIFAN 620EV 267,000 1490 30 170 (Urban driving cycle) 60,000 50,000 Jul, 2011 Data n/a
620CEV 249,800 1350 24 150 (Urban driving cycle) 60,000 50,000 2012 Data n/a
BAIC E150EV 249,800 1370 23 140 60,000 35,000 2012 644
SAIC ROEWE E50 234,900 1080 18 180 (60 kph constant 54,000 35,000 Oct, 2012 238
speed)
SHANGHAI SAIL 258,000 1385 21.4 200 (60 kph constant 60,000 50,000 Nov, 2012 11
GM SPRINGO speed)
CHANGAN E30 350,000– 1610 29 160 (60 kph constant 60,000 35,000 Apr, 2012 100
380,000 speed)
BENBEN 200,000 1310 19.2 105 (30 kph constant 57,600 35,000 Dec, 2011 Data n/a
speed)

a
QQ3EV is not subsidized as it is powered by lead–acid battery.
b
The electric range is tested under New European Driving Cycle (NEDC), expect when noted.
c
For detailed vehicle configurations, refer to:
http://www.bydauto.com.cn/car-param-e6.html.
http://www.zotye.com/new_energy2.html.
http://www1.cherynewenergy.com/html/QQ3_EV.html.
http://www.jac.com.cn/new-energy/tongyue/index.html.
http://www.zklf-ev.com/ShowProducts.asp?id=15.
http://www.evbeijing.cn/wxxc/201304/t20130401_186157.htm.
http://www.roewe.com.cn/roewee50/configure/.
http://news.xinhuanet.com/auto/2012-12/06/c_124046978_7.htm.
http://auto.163.com/13/0313/15/8PRUGCOL00081G98.html.
http://paper.people.com.cn/zgnyb/html/2011-03/28/content_780089.htm.

(¥60,000) under phase I EVSS. However, under phase II EVSS, only

Fig. 2. Qualified subsidies of available BEPV models.
suggested retail price (MSRP), curb weight, battery capacity,
electric range, qualified subsidy under phase I and phase II EVSS,
market entry time and sales in 2012 are presented.
With the update of EVSS, the qualified subsidies for most
vehicle models have changed significantly. Fig. 2 presents the
battery capacities and electric ranges of available BEPV models and
the resulting qualified subsidies under phase I and phase II EVSS.
As it shows, most BEPV models are equipped with 20 kW h or
higher battery packs and are qualified for the maximum subsidy
BYD E6, with electric range of 300 km, is qualified for the ¥60,000
subsidy. Five models (ZOTYE 5008EV, ZOTYE M300EV, LIFAN
620EV, LIFAN 620CEV and SAIL SPRINGO) are qualified for the
¥50,000 subsidy. Other models are only qualified for the ¥35,000
subsidy. There is a general decrease of subsidy amount for these
BEPV models. This implies that the subsidy intensity of phase II
EVSS is generally lower than phase I.
The change of subsidy standard favors long-electric-range BEPVs.
Under phase II EVSS, manufactures are encouraged to produce BEPVs
with larger battery capacity and higher energy efficiency. It should be
noted that there are quite a few BEPV models whose electric ranges
are around 150 km. Considering the big gap between the lowest
(¥35,000) and medium (¥50,000) subsidy levels, these models are
likely to be improved to overcome the 150 km threshold. 150 km
might become the bottom-line-electric-range for major BEPV models
in the near future. Besides, the change of subsidy criteria from battery
capacity to electric range might pose a positive impact on manufac-
tures to place higher priority on vehicle’s energy efficiency.
It should be noted that PHEPV and BEPV powered by lead–acid
batteries are not qualified for subsidy. Among all BEPV models
listed in Table 3, CHERY QQ3EV is the only BEPV model powered
by lead–acid battery. Even without subsidy, CHERY QQ3EV is the
top-selling BEPV model in China in 2012. The exclusion of lead–
acid battery powered BEPVs can be mostly attributable to their
relative low cost compared with lithium ion battery powered
BEPVs. Besides, the government considers lead–acid battery a low-
end technology and shows less interest in its development.
 H. Hao et al. / Energy Policy 73 (2014) 722–732
3.2. Plug-in hybrid electric passenger vehicles
There are currently only a few available PHEPV models in
China. Taking BYD F3DM for example, its battery capacity is
16 kW h, which can sustain an electric range of 60 km. Under
phase I EVSS, it is qualified for ¥48,000 subsidy. However, under
phase II EVSS, it is no longer qualified for subsidy as its electric
range is lower than 80 km. Chevrolet Volt, as another example,
also faces decrease in subsidy amount (from ¥48,000 to ¥35,000)
after the implementation of phase II EVSS.
The impact of subsidy changes on PHEPV manufactures is
significant. Considering the 80-km electric range requirement of
phase II EVSS, PHEPV manufactures will be encouraged to produce
PHEPVs with electric range of higher than 80 km. Despite this,
from the subsidy perspective, manufactures do not have the
motivation to produce PHEPVs with electric range of much higher
than 80 km, as the subsidy is fixed to ¥35,000 regardless of the
electric range. 80 km (50 mile) might become the preferred
electric range for the design of PHEPV in the near future. This
change in subsidy standard reflects China’s strategy on PHEPV
development, which place more focus on high-capacity PHEPV
rather than low-capacity PHEPV.
3.3. Buses
The impact of subsidy scheme update on hybrid electric buses
is significant. Taking the YUTONG 12-m hybrid bus for example,
under phase I EVSS, it is qualified for ¥360,000 subsidy, which
covers around one third of its price. In current situation, this
subsidy is necessary for hybrid electric buses to compete with
conventional diesel buses. As hybrid electric buses are excluded
from phase II EVSS, heavy burden will be put on hybrid electric bus
manufactures.
The subsidy for 10-m or longer battery electric buses maintains
at the ¥500,000 level. Meanwhile, the subsidy scope is extended to
include 6–8 m and 8–10 m battery electric buses. This will encou-
rage manufactures to extend their battery electric bus product line.
By contrast, the subsidies for plug-in hybrid electric buses and fuel
cell electric buses both decreased considerably. These changes in
subsidy scheme for transit buses imply a significant favor for
battery electric buses.
4. Impacts of EVSS on passenger vehicle ownership cost
Consumer’s vehicle choice is affected by several factors, among
which the cost factor, which we measured using vehicle owner-
ship cost, shows dominating impact. In research perspective,
consumer’s vehicle choice has been widely modeled based on
consumer choice theory, which relates preferences to consump-
tion expenditures. Greene (2001) employed nested multinomial
logit model, a kind of discrete choice model, to analyze the market
penetration of alternative vehicles. Vehicles are fit into a three-
level nesting structure. The first, second and third level of nesting
predict the probability of choice of fuel types, vehicle technologies
and technology sets, respectively. Each vehicle choice alternative is
Table 4
CPV models chosen to be compared.
CPV model Engine displacement (L) Transmission type
CHERY QQ3 1.0 AMT
JAC TONGYUE 1.3 AMT
BYD M6 2.4 AMT
ZOTYE 5008 1.3 CVT
BAIC E150 1.3 AT
727
assigned with a utility, which is a function of its attributes and
other variables. The considered vehicle attributes include vehicle
price, fuel cost, non-fuel operation and maintenance (O&M) cost,
range capacity, acceleration performance, luggage space etc.
Among these attributes, the cost-related items, including vehicle
price, fuel cost and non-fuel O&M cost, which are commonly
summarized as vehicle ownership cost, shows dominating impact
on the entire utility. In this sector, we focused our analysis on the
impacts of EVSS on the ownership cost of BEPVs.
4.1. Vehicles to be compared
The top 5 best-selling BEPV modals in 2012, which are CHERY
QQ3EV, JAC iEV3, BYD E6, ZOTYE 5008EV and BAIC E150EV,
accounted for over 95% of total BEPV sales. We chose these five
BEPV models to analyze their ownership costs.
To make the ownership cost analysis on a comparable basis, we
also chose five similar CPV models as counterparts of the five BEPV
models. Except for BYD E6, all other 4 BEPV models are modified
based on existing CPV models, which we chose as the counterpart
models. For BYD E6, which is a 5-seat MPV, we chose BYD M6, a
MPV from the same manufacturer, as the counterpart model.
Regarding engine displacement, JAC TONGYUE, ZOTYE 5008 and
BAIC E150 are optional with 1.3 L and 1.5 L. Considering the
comparability of vehicle performance, we chose 1.3 L engine
displacement for these three models. CHERY QQ3 is optional with
0.8 L and 1.0 L models, between which we chose the 1.0 L model.
BYD M6 2.4 L model was chosen. All models chosen are equipped
with Automatic Transmission (AT), Automated Mechanical Trans-
mission (AMT) or Continuously Variable Transmission (CVT),
depending on the availability of transmission types. Under same
engine displacement and transmission configurations, some vehi-
cle models are optional with different accessories and interior trim
configurations. Under this situation, we chose the models with
highest configurations. The parameters of counterpart CPV models
are presented in Table 4. It should be noted that the fuel
consumption rate (FCR) values, which were obtained from China’s
official FCR database (Ministry of industry and information
technology of PRC, 2013), are labeled values, which were tested
under NEDC. The real-world FCR is around 15% higher than the
labeled FCR (Hao et al., 2011a, 2012).
4.2. Ownership cost decomposition
Vehicle ownership cost is defined as the present value of
consumer cost caused by owning a vehicle (Lin et al., 2013). For
ease of comparison, we used per km cost, measured in yuan/km, as
the index for vehicle ownership cost. We classified vehicle own-
ership cost into vehicle purchase cost, fuel cost, non-fuel O&M cost
and vehicle salvage value, as Eq. (1) shows. Eqs. (2)–(5) present the
decomposition of each ownership cost component.
!
ðFC i þ OC i Þ RV n
PC þ∑ni¼ 1 
ð1 þDRÞi  1 ð1 þ DRÞn  1
OC n ¼ ð1Þ
∑ni 1 DT i
MSRP (Yuan) Curb weight (kg) FCR (L/100 km) Counterpart BEPV model
50,900 897 6.3 CHERY QQ3EV
56,800 1100 6.3 JAC iEV3
153,900 1760 10.6 BYD E6
69,800 1165 6.7 ZOTYE 5008EV
65,100 1090 6.8 BAIC E150EV
728 H. Hao et al. / Energy Policy 73 (2014) 722–732
where, OCn is the ownership cost for vehicles lasting n years
(yuan/km); PC is the vehicle purchase cost (yuan); FCi is the fuel
cost at vehicle age i (yuan); OCi is the non-fuel O&M cost at vehicle
age i (yuan); RVn is the vehicle salvage value at vehicle age n
(yuan); DR is the discount rate, which is assumed to be 6% in the
analysis (Hao et al., 2014b); and DTi is distance traveled at vehicle
age i (km).
4.2.1. Vehicle purchase cost and salvage value
PC ¼ MSRP þ VPT þV RF  SUB ð2Þ
RV n ¼ MSRP  ð1  VDRÞn ð3Þ
where, MSRP is the manufacturer suggested retail price (yuan);
VPT is the vehicle purchase tax (yuan); VRF is the vehicle registra-
tion fee (yuan); SUB is the vehicle purchase subsidy (yuan); and
VDR is the vehicle value depreciation rate.
Eq. (2) presents the calculation of vehicle purchase cost. Vehicle
purchase cost consists of vehicle price, vehicle purchase tax,
vehicle registration fee and subsidy. We used MSRP to measure
vehicle price. Except for CHERY QQ3EV, which is powered by lead–
acid battery, the MSRP of other four BEPV models is 2.4 to 3.8 times
the MSRP of counterpart CPV models. The higher MSRP can be
mostly attributable to the high cost of Li-ion batteries. Vehicle
purchase tax is calculated as 10% of before-VAT (Value Added Tax,
17%) vehicle price, i.e. MSRP divided by 11.7. It should be noted
that vehicle purchase tax for BEPVs is calculated based on post-
subsidy vehicle price. Registration fee is around ¥500 per vehicle.
Qualified subsidy for each vehicle model is drawn from Table 3.
Subsidy from local government is assumed to be 50% of subsidies
from central government.
Vehicle salvage value can be estimated by the resale price of
second-hand vehicles. In this study, we introduced the parameter
of vehicle value depreciation rate to estimate vehicle salvage value,
as Eq. (3) shows. There is little information of vehicle value
depreciation rate of China’s passenger vehicles. We assumed the
depreciation rate to be 20%, which is backed by the U.S. second-
hand vehicle market data (Kelley Blue Book, 2013). It should be
noted that even in the U.S. market, there is little information on
the depreciation rate of BEPVs. BEPVs confront the issue of battery
performance degradation and might yield a higher depreciation
rate. However, due to lack of data, we used the same depreciation
rate for BEPV and CPVs.
4.2.2. Fuel cost
FC i ¼ FCR  FP  DT i ð4Þ
where, FCR is the vehicle fuel consumption rate (L/100 km or
kW h/100 km); and FP is the fuel price (yuan/L or yuan/kW h).
As Eq. (4) shows, fuel cost is determined by FCR, fuel price and
distance traveled. The labeled FCRs of CPVs were listed in Table 4.
We assumed the real-world FCR to be 15% higher than the labeled
FCR. The FCRs of BEPVs were reported under different driving
conditions, including NEDC, urban driving cycle, 30-kph constant
speed and 60-kph constant speed driving. We converted the FCR
under urban driving cycle, 30-kph constant speed and 60-kph
constant speed to FCR under NEDC by multiplying the coefficients of
0.93, 1.28 and 1.33, respectively. These coefficients were obtained by
referring to models providing FCR under multi-driving conditions.
The FCR under NEDC was then converted to real-world FCR by the
same method as CPVs. As of Oct, 2013, the prices for 92# gasoline
(comparable to 87# gasoline in the U.S.) and commercial electricity
were ¥7.83/L and ¥0.81/kW h in Beijing, respectively. Regarding
distance traveled, we assumed a typical driving profile with annual
driving distances of 12,000 km. As suggested by existing studies
(Davis et al., 2013), vehicle travel tends to decrease as vehicle age
grows. We assumed the driving distance to decrease by 3% per year.
Note that we assumed that BEPV is capable of covering all the
distance driven. This assumption might not hold when considering
the range limit of BEPVs. Hao et al. (2014b) discussed the case when
considering alternative transportation cost due to range limit of
BEPVs. In this study, to simplify the comparison, we ignored the
discussion of alternative transportation cost.
4.2.3. Non-fuel O&M cost
OC i ¼ ISi þ UT i þ MC i ð5Þ
where, ISi is the insurance cost at vehicle age i (yuan); UTi is the
vehicle use tax at vehicle age i (yuan); and MCi is the maintenance
cost at vehicle age i (yuan).
As Eq. (5) shows, non-fuel O&M cost consists of maintenance
cost, insurance cost and vehicle use tax. Parking fee and toll are
the same for CPV and BEPV, for which we did not include in our
analysis. Vehicle maintenance is normally carried out per 5000 km
driven, with the maintenance cost of around ¥500. Based on this,
we assumed the maintenance fee to be ¥0.1/km. Note that the
maintenance fee of BEPV and CPVs could be quite different due to
different vehicle configurations, especially when considering the
battery replacement cost of BEPVs. But due to lack of data, we
ignored this difference.
Vehicle insurance includes the compulsory insurance for traffic
liability and optional commercial insurances. The compulsory
insurance for traffic liability is ¥950/year for passenger vehicles.
The commercial insurances are of wide varieties and most of them
are correlated to vehicle price. In this study, we chose the three
most commonly purchased commercial insurances, which are
vehicle damage insurance, third-party liability insurance, and
deductible-exempt insurance, as our comparison basis. The vehicle
damage insurance and deductible-exempt insurance are linearly
correlated with vehicle price, implying a higher insurance cost for
BEPVs. The total insurance cost is finally discounted with a
coefficient to reflect the average market discount provided by
the insurance companies.
Vehicle use tax was estimated based on Beijing’s vehicle use tax
scheme. The vehicle use taxes are graded based on vehicle engine
displacements. The vehicle use tax for the five CPVs in our study
ranges from ¥300/year to ¥900/year. BEPVs are assumed to be
exempted from vehicle use tax, which is in line with Beijing’s
current policy.
4.2.4. Scenario assumptions
To help fully understand the impact of subsidy on vehicle own-
ership cost, we estimated the vehicle ownership cost under phase I
EVSS (2012), phase II EVSS (2013) and phase II EVSS under phase-out
mechanism (2014 and 2015). We also explored the 2020 scenario.
The scenarios were established with one midrange case and one
optimistic case to address the uncertainty. The optimistic case reflects
the possibility under high gasoline price and successfully reduced
Li-ion battery cost. The midrange case reflects the possibility under
moderate gasoline price and Li-ion battery cost. In this section, we
presented the assumptions needed to establish the scenarios. Among
all the factors affecting vehicle ownership cost, vehicle price, FCR and
fuel price are with significant uncertainty.
In China’s vehicle market, the vehicle price of CPVs has
stabilized over recent years. However, with the tightening of FCR
and emission standards, CPVs might confront cost increase asso-
ciated with fuel saving and emission control technologies. We
assumed a 10% increase in vehicle MSRP in 2020 for CPVs.
The labeled FCR of the five CPV models in our study ranges
from 6.3 L/100 km to 10.6 L/100 km. As projected by China’s
 H. Hao et al. / Energy Policy 73 (2014) 722–732
passenger vehicle fuel consumptions regulation, the average
labeled FCR of 2020 passenger vehicle models should decrease to
5 L/100 km. Based on this target, we assumed that the FCR of CPVs
decrease by 5% in 2015 and 20% in 2020.
China’s gasoline price has increased rapidly over recent years.
From an international comparison, if only converted based on
exchange rate, the gasoline price in China is higher than the U.S.
while lower than most European countries. Gasoline price is
affected by numerous factors and is unlikely to be projected. We
assumed two cases to address the uncertainty. Under optimistic
case, gasoline price in 2020 rises to the level of current gasoline
price in Germany, which is around ¥13/L. This might happen if
international oil price raises continuously or government pose
high fuel tax on gasoline. Under the midrange case, gasoline price
is assumed to rise at half the rate under optimistic case.
The vehicle price of BEPVs depends critically on battery cost,
which normally accounts for over half of total vehicle cost. The
current cost of Li-ion battery is around ¥4000/kW h–¥6000/kW h.
As projected by China’s “Energy Saving and New Energy Vehicle
Industry planning”, the cost of Li-ion battery will decrease to
¥2000/kW h in 2015 and ¥1500/kW h in 2020, implying huge
potential for the cost reduction of BEPVs. To address the uncer-
tainty of battery cost, we assumed two cases for battery cost
decrease, which is reflected in vehicle MSRP change. Under
optimistic case, the battery cost decreases as projected by the
planning. The glider cost (vehicle cost other than battery cost)
decreases by 10% in 2015 and 20% in 2020, making the MSRP of
BEPVs decrease by around 30% in 2015 and 40% in 2020. The
decrease of battery cost under midrange case is assumed to be
slower than that under optimistic case, which was at ¥3500/kW h
in 2015 and ¥3000/kW h in 2020. The glider cost decrease rate
was assumed to be the same with that under optimistic scenario.
Note that as CHERY QQ3EV is powered by lead–acid battery, we
assumed that its MSRP would not change over time.
The energy efficiency of BEPVs is significantly higher than CPVs.
Due to the high efficiency vehicle configuration, FCR of BEPVs are
likely to maintain at the current level with little improvements. In
this study, we assumed that the FCR of BEPVs would not change
over time. Regarding electricity price, we assumed commercial
electricity price will rise by 15% in 2015 and 50% in 2020. All data
in non-mentioned years were obtained through linear interpola-
tion. The scenario assumptions were summarized in Table 5.
4.3. Ownership cost comparison
The ten-year ownership costs of the five BEPV models and their
counterpart CPV models were presented in Fig. 3(a) through Fig. 3(e).
Note that vehicle ownership cost changes with vehicle age. We used
ten years as the basis for calculation and comparison as it is the
typical length of owning a passenger vehicle in China (Hao et al.,
2011a, 2011c).
Table 5
Scenario assumptions for key factors.
Vehicle cost CPV MSRP (Relative to 2012)
BEPV battery (yuan/kW h) Midrange
Optimistic
BEPV glider (Relative to 2012)
FCR CPV (Relative to 2012)
BEPV (Relative to 2012)
Fuel price Gasoline (yuan/L) Midrange
Optimistic
Electricity (yuan/kW h)
a
The price was derived by averaging all available price records within one year.
729
Fig. 3(a) presents the ownership cost comparison between
CHERY QQ3 and QQ3EV. As the ownership cost of QQ3EV is not
affected by Li-ion battery cost (QQ3EV is powered by lead–acid
battery) or subsidy (QQ3EV is not qualified for subsidy), only its
value under midrange case was presented. Under both midrange
case and optimistic case, the ownership cost of QQ3EV is sig-
nificantly lower than QQ3. The ownership cost difference tends to
be bigger in 2020. This comparison suggests that lead–acid battery
powered BEPVs can be quite cost competitive compared with
CPVs. The low ownership cost of QQ3EV seems to capture the most
important reason why QQ3EV yielded the highest sales among all
BEPV models in 2012.
Fig. 3(b) presents the ownership cost comparison between JAC
iEV3 and TONGYUE. Under midrange case, if without subsidy, the
ownership cost of iEV3 is significantly higher than YONGYUE. This
gap becomes smaller over time and tends to be closed in 2020. If
with subsidy, the ownership cost of iEV3 is lower than TONGYUE
in 2012 (under phase I EVSS). In 2013 (under phase II EVSS), the
ownership cost of iEV3 increases significantly and surpasses
TONGYUE. In 2014 and 2015 (phase II EVSS with 10% and 20%
phase-out), the ownership cost of iEV3 decreases smoothly and is
around the same level of TONGYUE.
Under optimistic case, if without subsidy, the ownership cost of
iEV3 is also higher than TONGYUE. But the gap closes at around
2015, five years earlier than under midrange case. In 2020, the
ownership cost of iEV3 can be considerably lower than TONGYUE
even without subsidy. If with subsidy, the ownership cost of iEV3
could get advantage compared with TONGYUE before 2015.
The comparison above signifies that subsidy is necessary for
BEPV to be cost competitive compared with CPV in the short term,
especially before 2015. The transition from phase I EVSS to phase II
EVSS might pose an temporary negative impact on BEPV owner-
ship cost competitiveness, which could be soon offset by the
projected decrease in BEPV cost. The phase-out mechanism of
phase II EVSS is tested to be reasonable in terms of maintaining
the cost competitiveness of BEPVs. In the mid term of around
2015–2020, BEPV could become less or not reliant on subsidy to
maintain cost competitiveness. The high sales of iEV3, which
ranked 2nd in 2012 among all BEPV models, again demonstrates
the importance of low ownership cost in yielding good sales.
Fig. 3(c) presents the ownership cost comparison between BYD
E6 and M6. The basic trend and interaction of ownership cost
between E6 and M6 are similar with the JAC group. The major
difference is that E6 is equipped with far larger Li-ion battery pack.
Due to the large battery pack, the ownership cost of E6 in 2012 and
2013 is significantly higher than M6, whether with or without
subsidy. This seems to be conflicted with the fact that E6 sales
ranked the third highest among all BEPV models in 2012. One
important fact is that a considerable proportion of E6 sales are
associated with public purchase to be used as urban taxis. E6 is
favored to be used as urban taxis because it affords the longest
2012 2013 2014 2015 2020
0 0 þ 1% þ 2% þ 10%
5000 4500 4000 3500 3000
5000 4500 3000 2000 1500
0 0  5%  10%  20%
0 0  2.5%  5%  20%
0 0 0 0 0
7.84 a 7.73 a 8.05 8.37 10.37
7.84 7.73 8.37 9.00 13.00
0.81 0.81 0.87 0.93 1.22
730 H. Hao et al. / Energy Policy 73 (2014) 722–732

Fig. 3. Ten-year ownership cost comparison between (a) CHERY QQ3 and QQ3EV (b) JAC iEV3 and TONGYUE (c) BYD E6 and M6 (d) ZOTYE 5008EV and 5008 (e) BAIC E150EV
and E150. Note: PI: phase I; PII: phase II; PO: phase out; w/o: without; Sub: subsidy; Mid: midrange scenario; Opt: optimized scenario.

electric range among all BEPV models. This shines a light on another around 2015, benefiting from battery cost decrease, the ownership
important characteristic, besides low ownership cost, to make BEPV cost of E6 is projected to drop fast. In 2020, even under midrange
market competitive, notably in the taxi market. In the near term case, the ownership cost of E6 is comparable with that of M6.
 H. Hao et al. / Energy Policy 73 (2014) 722–732
Fig. 3(d) presents the ownership cost comparison between
ZOTYE 5008EV and 5008. As the comparison is quite similar with
the comparison between JAC iEV3 and TONGYE, we did not go into
details for this group.
Fig. 3(e) presents the ownership cost comparison between BAIC
E150EV and E150. The 24 kW h-battery pack equipped on E150EV
is quite a mainstream configuration. However, the MSRP of E150EV
(¥249,800) is unusually higher than the similar-class BEPVs, taking
JAC iEV3 with MSRP of ¥158,000 for example. The reason for this
unusually high MSRP is not clear. It does illustrate the diversity of
technology status and market strategy of China’s BEPV manufac-
turers. Due to E150EV’s high MSRP, its ownership cost in 2020 is
still a bit higher than that of E150 even under optimistic case.
5. Policy implications
The major policy target of EVSS is to promote the EV market
penetration. As Table 3 presents, the sales of BEPV models in 2012
ranged from fewer than 100 to more than 5000, with total sales of
12,085. Compared with the 15.5 million passenger vehicles sold in
2012 in China, BEPV accounted for less than 0.1% of total sales. That
is to say, the implementation of EVSS did not successfully start up
the BEPV market. In this section, we tried to discuss the reasons
for the low sales of BEPVs.
Given the many disadvantages of BEPV compared with CPV,
among which electric range limit is the essential one, BEPV has to
yield a relatively lower ownership cost compared with CPV to gain
market share. As we estimated based on the five top-selling BEPV
models in 2012, except for QQ3EV, their ownership costs under
phase I and phase II EVSS are just around or significantly higher
than their counterpart CPV models. This partially explains the fact
that BEPV gained little market share in 2012. The current EVSS is
necessary but not enough to start up the BEPV market. As we
projected, under phase II EVSS from 2013 to 2015, there are two
major possibilities. Under optimistic case, which implies a success-
ful decrease in Li-ion battery cost, the ownership cost of BEPVs
would gain significant advantage versus CPVs. This could lead to
the successful take off of BEPV market. However, under midrange
case, which implies a bottleneck of Li-ion battery cost at around
¥3000/kW h, the ownership cost of BEPVs might just sustain
around the current level. Under this case, it is difficult for BEPVs
to gain larger market share. Here we reach an important policy
implication. Phase I and phase II EVSS set a stage for BEPVs to
increase their cost competitiveness. However, the EVSS itself is
never enough to start up the BEPV market. Another necessary
condition for BEPV market penetration is technology improvement
associated with battery cost decrease. The future of BEPV depends
critically on if and when battery cost can be successfully reduced.
Note that diversity exists in the configuration and cost of current
BEPV models, resulting in different ownership cost comparison
against their counterpart CPVs. However, the major trend of
ownership cost is robust for most BEPV models.
The relatively better market performance of lead–acid battery
powered CHERY QQ3EV is an important paradigm, as it demon-
strates that when ownership cost is low enough, BEPVs are
attractive to consumers regardless of BEPVs’ electric range limita-
tions. The rapid development of what is called Shanzhai BEPVs,
which denotes the low-end BEPVs, typically manufactured by local
small-scale vehicle manufactures and powered by lead–acid bat-
tery, also proves this conclusion. Lead–acid battery powered BEPVs
have benefited from China’s large electric bike industry in terms of
technology synergy and component sharing. Under current cir-
cumstance, there seems to be at least a temporary niche market
for the development of these BEPVs.
731
Despite the market penetration of CHERY QQ3EV and other
lead–acid battery powered BEPVs, there is continuing controversy
over whether the so called low-end BEPVs should be encouraged.
Many people consider that these low-end BEPVs oriented from
low technologies and do little good to the competitiveness of
China’s automotive industry. Besides, the manufacturing and
recycling of lead–acid battery can raise a series of environmental
issues. Currently, China’s central government basically holds a
negative attitude towards the development of low-end BEPVs.
There are many institutional barriers for the low-end BEPVs, such
as lack of standard, difficulty in obtaining vehicle qualification, etc.
6. Conclusions
In this paper, we presented the rationale of China’s phase I and
phase II EVSS and estimated their impacts on vehicle ownership
cost with a focus on BEPVs. We concluded that China’s EVSS is very
necessary for BEPVs to be cost competitive compared with CPVs in
the short term, especially before 2015. The transition from phase I
EVSS to phase II EVSS will generally reduce subsidy to private
purchase of PHEPVs and BEPVs. Thus, the ownership cost of BEPVs
will temporarily rise at the beginning of phase II EVSS. However,
with the decrease of BEPV manufacturing cost, the ownership cost
of BEPVs is projected to decrease despite of the phase-out
mechanism of phase II EVSS. That is to say, the phase-out
mechanism of phase II EVSS is tested to be reasonable to maintain
the cost competitiveness of BEPVs. In the mid term of around
2015–2020, BEPV could become less or not reliant on subsidy to
maintain cost competitiveness. However, given the disadvantage
of BEPVs, especially the limited electric range, China’s current
EVSS is not sufficient to start up the BEPV market. Technology
improvement associated with Li-ion battery cost reduction has to
play an essential part in the taking off of China’s BEPV market.
Although excluded from the subsidy scope of China’s EVSS, the
lead–acid battery powered BEPVs has gain good market responses
due to their low ownership cost, regardless of their disadvantage
of electric range limitation.
The transition from phase I to phase II EVSS will pose
considerable impact on vehicle manufacturers. The electric
range-based subsidy standard under phase II EVSS, rather than
the battery capacity based subsidy standard under phase I EVSS,
has explicit implications for vehicle manufactures to optimize the
electric range of PHEPVs and BEPVs. As we projected, 80 km
(50 mile) might become the preferred electric range for the design
of PHEPV in the future. The change of subsidy standard favors
long-electric-range BEPVs. 150 km might become the bottom-line-
electric-range for major BEPV models in the future. The exclusion
of HEV from phase II EVSS, both in public and private sector, will
greatly curtail the overall subsidy benefits and halt the incentive
for HEV manufacturers.
We proposed several topics that need further study. First, this
paper focuses on the impact of EVSS on passenger vehicles rather
than transit buses. Further investigation is needed in consideration
of EVSS’s impact on ownership cost of China’s transit bus fleet.
Second, the vehicle value depreciation rates and maintenance
costs of BEPV and PHEPV can be quite different from CPV, which
affect the estimation of ownership costs. Due to lack of data, we
ignored the differences in this study. This drawback can be
addressed with more supporting data available in the future.
Acknowledgements
The project is supported by the Ministry of Science and
Technology (2010DFA72760, 2011DFA60650, 2011AA11A288,
732 H. Hao et al. / Energy Policy 73 (2014) 722–732
2012DFA81190, Z121100007912001, 2013BAG06B02), the China
National Natural Science Foundation (71103109) and the China
Automotive Energy Research Center (CAERC) program. The authors
would like to thank the anonymous reviewers for their review and
comments.
References
Al-Alawi, B.M., Bradley, T.H., 2013. Review of hybrid, plug-in hybrid, and electric
vehicle market modeling studies. Renewable Sustainable Energy Rev. 21,
190–203.
Al-Ghandoor, A., 2013. An approach to energy savings and improved environmental
impact through restructuring Jordan’s transport sector. Renewable Sustainable
Energy Rev. 18, 31–42.
Al-Ghandoor, A., Samhouri, M., Al-Hinti, I., Jaber, J., Al-Rawashdeh, M., 2012.
Projection of future transport energy demand of Jordan using adaptive
neuro-fuzzy technique. Energy 38, 128–135.
Burke, A., Zhao, H., 2012. Energy Saving and Cost Projections for Advanced Hybrid,
Battery Electric, and Fuel Cell Vehicles in 2015-2030 EVS26, Los Angeles.
China Vehicle Technology Service Center, 2009. Outline for Testing the Maximum
Electric Power Ratio and Fuel Saving Ratio of Energy-saving and New Energy
Vehicles. Beijing.
Davis, S.C., Diegel, S.W., Boundy, R.G., 2013. Transportation Energy Databook
Edition. Oak Ridge National Laboratory, Oak Ridge p. 32.
Eppstein, M.J., Grover, D.K., Marshall, J.S., Rizzo, D.M., 2011. An agent-based model
to study market penetration of plug-in hybrid electric vehicles. Energy Policy
39, 3789–3802.
Geng, Y., Ma, Z., Xue, B., Ren, W., Liu, Z., Fujita, T., 2013. Co-benefit evaluation for
urban public transportation sector—a case of Shenyang, China. J. Cleaner Prod.
58, 82–91.
Greene, D., 2001. TAFV Alternative Fuels and Vehicles Choice Model Documenta-
tion. Oak Ridge National Laboratory, Oak Ridge.
Guan, D., Hubacek, K., Weber, C.L., Peters, G.P., Reiner, D.M., 2008. The drivers of
Chinese CO2 emissions from 1980 to 2030. Global Environ. Change 18, 626–634.
Hang, W., Xie, Y.C., He, J., 2013. Assessment of on-road trucks-related fuel
consumption and GHG emissions in China. In: Transportation Research Board
92nd Annual Meeting.
Hao, H., Geng, Y., Wang, H., Ouyang, M., 2014a. Regional disparity of urban
passenger transport associated GHG emissions in China: a review. Energy 68,
783–793.
Hao, H., Wang, H., Ouyang, M., 2011a. Fuel conservation and GHG (Greenhouse gas)
emissions mitigation scenarios for China’s passenger vehicle fleet. Energy 36,
6520–6528.
Hao, H., Wang, H., Ouyang, M., 2012. Fuel consumption and life cycle GHG
emissions by China’s on-road trucks: future trends through 2050 and evalua-
tion of mitigation measures. Energy Policy 43, 244–251.
View publication stats
Hao, H., Wang, H.W., Ouyang, M.G., 2011b. Comparison of policies on vehicle
ownership and use between Beijing and Shanghai and their impacts on fuel
consumption by passenger vehicles. Energy Policy 39, 1016–1021.
Hao, H., Wang, H.W., Ouyang, M.G., Cheng, F., 2011c. Vehicle survival patterns in
China. Sci. China Technol. Sci. 54, 625–629.
Hao, H., Wang, H.W., Song, L.J., Li, X.H., Ouyang, M.G., 2010. Energy consumption
and GHG emissions of GTL fuel by LCA: results from eight demonstration transit
buses in Beijing. Appl. Energy 87, 3212–3217.
Hao, H., Wang, H.W., Yi, R., 2011d. Hybrid modeling of China’s vehicle ownership
and projection through 2050. Energy 36, 1351–1361.
Hao, H., Wang, M., Zhou, Y., Wang, H.W., Ouyang, M.G., 2014b. Levelized costs of
conventional and battery electric vehicles in China: Beijing experiences. Mitig.
Adapt. Strategies Glob. Change , http://dx.doi.org/10.1007/s11027-013-9536-1.
Huo, H., Wang, M., Zhang, X., He, K., Gong, H., Jiang, K., Jin, Y., Shi, Y., Yu, X., 2012.
Projection of energy use and greenhouse gas emissions by motor vehicles in
China: policy options and impacts. Energy Policy 43, 37–48.
IEA, 2013. CO2 Emissions from Fuel Combustion Highlights, 2013 ed. International
Energy Agency, Paris.
Internal Revenue Service, 2011. Plug-In Electric Drive Vehicle Credit,. 〈http://www.irs.
gov/Businesses/Plug-In-Electric-Vehicle-Credit-%28IRC-30-and-IRC-30D%29〉.
JAMA, 2010. Fact Sheet—Japanese Government Incentives for the Purchase of
Environmentally Friendly Vehicles. Japan Automobile Manufacturers Associa-
tion, Japan.
Kelley Blue Book, 2013. Kelley Blue Book Research Tools. 〈http://www.kbb.com〉.
Lin, C., Wu, T., Ou, X., Zhang, Q., Zhang, X., Zhang, X., 2013. Life-cycle private costs of
hybrid electric vehicles in the current Chinese market. Energy Policy 55,
501–510.
Ministry of industry and information technology of PRC, 2013. Fuel Consumption
Rate of Light Duty Vehicles. 〈http://chinaafc.miit.gov.cn/〉, Beijing.
Mueller, M.G., de Haan, P., 2009. How much do incentives affect car purchase?
Agent-based microsimulation of consumer choice of new cars—Part I: Model
structure, simulation of bounded rationality, and model validation. Energy
Policy 37, 1072–1082.
Ou, X.M., Yan, X.Y., Zhang, X.L., Liu, Z., 2012. Life-cycle analysis on energy
consumption and GHG emission intensities of alternative vehicle fuels in China.
Appl. Energy 90, 218–224.
Peterson, S.B., Michalek, J.J., 2013. Cost-effectiveness of plug-in hybrid electric
vehicle battery capacity and charging infrastructure investment for reducing US
gasoline consumption. Energy Policy 52, 429–438.
Plotkin, S., Singh, M., 2009. Multi-Path Transportation Futures Study: Vehicle
Characterization and Scenario Analyses. Argonne National Laboratory.
Ross Morrow, W., Gallagher, K.S., Collantes, G., Lee, H., 2010. Analysis of policies to
reduce oil consumption and greenhouse-gas emissions from the US transporta-
tion sector. Energy Policy 38, 1305–1320.
Skerlos, S.J., Winebrake, J.J., 2010. Targeting plug-in hybrid electric vehicle policies
to increase social benefits. Energy Policy 38, 705–708.
Yang, C.-J., 2010. Launching strategy for electric vehicles: lessons from China and
Taiwan. Technol. Forecasting Soc. Change 77, 831–834.
Zhu, S.L., 2010. Comparison of transportation energy consumption and greenhouse
gas emission between Beijing and Shanghai. Urban Transp. China 8, 58–63.