May 15, 2014 1:27 am JST

Electric-car makers charged up as China declares war on smog

TETSUYA ABE and KEN KUWAHARA, Nikkei staff writers

BEIJING/GUANGZHOU -- Global automakers such as Tesla Motors and Daimler are accelerating their push for electric vehicles in China, where the government is finally getting serious about fighting air pollution.

     At a Beijing commercial facility called Parkview Green, one of the popular destinations, besides designer-brand shops, is Tesla's first Chinese showroom. Having opened at the end of last year, the site is said to rake in more profits than any other Tesla store.

     The location showcases Tesla's sporty Model S, drawing waves of tourists and potential buyers even during the week. "The vehicle is so popular that delivery will be six months later," said a salesperson, adding that the company receives orders for as many as 20 cars a day.

Car of celebrities

The model sells for 734,000 yuan ($117,800), roughly the same price as a luxury sports car. It is enjoying strong demand even though the price is about 50% more than in the U.S., where Tesla is based, because of a tariff.

     "I can brag about this car to my friends. I'm going to buy two of them," raved a business owner from Zhejiang Province. The reputation of Tesla's electric vehicles as "the choice of celebrities" in the U.S. makes them a perfect fit for Chinese consumers, many of whom take pride in showing off their purchases.

     When a buyer was asked if he had any concerns about the car's travel distance, a salesperson immediately stepped up, proclaiming, "The Model S can travel 502km per charge. If you plug the car in at home before you leave in the morning, that'd be enough."

     The company also helps buyers set up charging stations. In fact, Chief Executive Officer Elon Musk visited China in April, pledging to spend several hundred million dollars to build charging infrastructure in the country.

     The U.S. company will soon set up shop in Shanghai and Hangzhou. It aims to sell 20,000 units in 2016, which would mean that 20% of all Tesla cars worldwide will be sold in China.

     The biggest reason global automakers are focusing on the Chinese eco-car market is that Beijing has launched serious efforts to popularize such vehicles. A key measure is developing the necessary infrastructure. State Grid Corporation of China, which is responsible for 80% of the country's grids, said in March that it will open the business of operating charging stations to private-sector companies.

     Tesla and other foreign concerns have already announced their intentions to enter the market. The government aims to set up enough charging stands in such big cities as Beijing and Shanghai to ensure that motorists can juice up within 5km from any given point.

     Beijing is also stepping up its subsidies program, while starting to use contributions to green efforts as a factor in assessing bureaucratic performance.

Nissan's "20% target"

Daimler will roll out the Denza sedan EV this September in Beijing, Shanghai and Shenzhen, having spent four years developing the car with local partner BYD. The car starts at 369,000 yuan, but the German automaker has succeeded in getting the model designated as eligible for local government subsidies. Therefore, "the vehicle will be available for just 255,000 yuan in Beijing, a price comparable with that of gasoline-powered cars," said BYD Chairman Wang Chuan-fu.

     Nissan Motor is also pursuing negotiations with local governments. The Japanese automaker plans to roll out in September a plug-in model for its Venucia line of cars sold exclusively in China. It will seek to obtain a 20% share of the country's EV market, according to Senior Vice President Jun Seki.

     A big obstacle, however, is a lack of consumer awareness. "I'm afraid the car battery would run out while I'm traveling. I won't buy an EV for another 10 years," said a taxi driver in Beijing. Furthermore, many people do not view environmental protection as an important matter, with a consumer saying, "EVs are just a toy for some wealthy people."

     Not surprisingly, sales of EVs and plug-in hybrids there remain weak, totaling just 13,000 units in 2012 and edging up to 17,000 the following year. The 2013 figure is less than 0.1% of new-car sales in the country for that year, which totaled 21.98 million units.

     While some local governments offered subsidies, others bent on protecting local businesses refused to award such sweeteners if automakers did not have factories in their regions.

     But the winds of change are finally beginning to gather strength as the country steps up its fight to sweep away the smog choking its major cities. BYD has won subsidies for its EV in Beijing and its plug-in hybrid in Shanghai.

     "Hybrids will become the mainstream in China, where stricter environmental regulations are expected to be enforced," predicts Seiji Kuraishi, the head of Honda Motor's Chinese operations.