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Chinese drivers shun hybrids because of lack of subsidy

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Chinese drivers shun hybrids because of lack of subsidy

Bloomberg News

Beijing -- Huang Jihai considered buying his 28-year-old daughter the world's first plug-in hybrid as a wedding gift in Beijing before choosing to save $2,500 with a gasoline-powered car instead.

"Some of the hybrids and electric cars look pretty cool, but they are too expensive," said Huang, 51, who opted for a General Motors Co. Chevrolet Cruze. "I'd rather spend less money on a reliable gasoline car."

While China's government has touted less-polluting cars as a way to improve air quality and cut reliance on imported oil, it has delayed a plan to introduce subsidies that may put the models within reach for buyers like Huang.

A lack of affordability may limit sales of such vehicles by GM, Nissan and Toyota Motor Corp., which have all announced plans to introduce new hybrids and electric cars in China by 2011. The sluggish demand also is curbing investment in less-polluting car technology, prompting domestic automakers to seek foreign alliance partners to help fund development.

"It's unrealistic to expect consumers to jump into the technology," said Bill Russo, a Beijing-based senior adviser at Booz & Co. "You don't have to be too advanced in math to realize that the gas-powered cars are much cheaper and probably deliver more performance and better range."

BYD Co., a Shenzhen-based carmaker 10 percent owned by Warren Buffett's Berkshire Hathaway, delivered 48 of its F3DM plug-in hybrids in 2009 at $21,940 apiece. The company sold 290,963 of the gasoline-powered F3, which starts at $8,758 and was China's best-selling model.

BYD is sticking with a goal of introducing its E6 electric car in China and the U.S. this year, said Henry Li, the company's general manager for exports.

Toyota sold 271 of its $38,051 Prius cars, the world's top-selling hybrid, in China last year, according to the China Association of Automobile Manufacturers. Overall passenger-car sales in the nation totaled 10.3 million.

Local sales of Honda Motor Co.'s Civic hybrid fell 4.9 percent to 193 units last year, making it the least popular Honda-brand model in China, said Yoshiyuki Kuroda, a company spokesman. The model is imported from Japan, adding a 25 percent tariff to the price tag.

China, the world's second-largest energy user, bought a record 203.8 million metric tons of crude oil last year as 37,383 new vehicles took to the roads every 24 hours. About 44 percent of Chinese cities have an air quality level of 3 or below, according to the State Information Center. China has five levels of air quality, with 1 indicating the cleanest air, 3 meaning "slight" pollution" and 5 representing "heavy" pollution.

"People in these cities can't avoid a life facing serious pollution, and that air quality is not good for their health," the State Information Center said in the 2010 China Automobile Market Outlook yearbook.

To fight the pollution and reduce oil dependence, the nation aims to have more than 60,000 alternative-energy vehicles on the roads of 10 cities by 2012, Miao Wei, a vice minister at the Ministry of Industry and Information Technology, said last year. Sales of such cars may account for 15 percent of the market by 2020, according to Miao.

The government was previously scheduled to announce subsidies for alternative energy-powered vehicles in January. It is still working on the details after seeking advice from automakers, Xu Ping, chairman of Dongfeng Motor Group Co., said.

The complexity of determining the standards and amount of subsidies caused the delay and the government is now expected to make an announcement in July, China Economic Times reported. The government is still debating the details, said Xu Changming, a research director at China's State Information Center.

"I can't wait until the government announces subsidies," said Huang, who has worked as a driver for the past 30 years.

Separate subsidies for smaller, conventional cars introduced in early 2009 helped Chinese vehicle sales surge 46 percent last year to 13.6 million, surpassing the U.S. to become the world's largest auto market. In Japan, government rebates for buyers of fuel-efficient cars helped make Toyota's Prius the nation's best-selling vehicle last year.

China's delay in subsidizing hybrids and electric cars has prompted Geely Automobile Holdings Ltd. to put on hold any plans to sell the vehicles, the company's executive director Lawrence Ang said in March.

From The Detroit News: http://detnews.com/article/20100513/AUTO03/5130383/1148/auto01/Chinese-drivers-shun-hybrids-because-of-lack-of-subsidy#ixzz0noW2RJYc

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