SHANGHAI – Fears that China will overtake the U.S. in the race to put electric vehicles on the road have fizzled.
Despite choking pollution in big Chinese cities, consumers here see EVs as too expensive or too difficult to recharge.
China has offered tax incentives on electric vehicles, but total sales of hybrid and electric vehicles last year were 12,791, according to the Chinese Association of Automobile Manufacturers.
In the U.S. in 2012, automakers sold 53,172 plug-in electric vehicles and 434,498 hybrids, representing a total market share of 3.4 percent, according to HybridCars.com.
"I think everyone would say it hasn't really taken root yet," GM China President Bob Socia said last month near the Shanghai auto show. "Objectives are worthy, but progress is slow."
Experts once believed that Chinese consumers would embrace electric vehicles because 4 out of 5 car buyers are purchasing a vehicle for the first time. They've never had an experience with cars with internal combustion engine, so they won't know what they're missing, the thinking went.
That thinking was wrong.
Similarly, progress is slow in the U.S. The federal government offers tax credits of up to $7,500 for the purchase of an electric vehicle or semi-electric car, such as the Nissan Leaf or Chevrolet Volt. But most people are still choosing internal combustion engines.
That means the door is still open for leaders to emerge in the electric vehicle space, as researchers pursue next-generation technologies amid a growing consensus that the current technology of lithium-ion batteries won't get much better or cheaper.
But the real number of electric vehicles sold in China last year was actually about 3,000, when factoring out hybrids and vehicles that aren't roadworthy, such as golf carts, said Namrita Chow, a Shanghai-based analyst for IHS Automotive.
President Barack Obama's administration has rescinded its previous target of putting 1 million electric vehicles on the road by 2015.
The Chinese government set a goal of getting 500,000 electric vehicles on the road by 2015, with the central and provincial governments offering incentives and also investing in infrastructure.
"They're going to continue to push it. ... There are some pretty fundamental issues with respect to charging stations," Socia said.
Chow said the central government's EV incentives expired Dec. 31, "which means everyone is waiting" for new subsidies to be announced under China's new president, Xi Jinping.
But Yale Zhang, managing director of Automotive Foresight Shanghai, said "half a million" is not a "mandatory target" set by the government. "It takes 10 years to have this segment be more realistic," he said.
In both countries, electric vehicles are more expensive vehicles. For example, the Volt, the most popular plug-in electric vehicle in the U.S. last year, costs $32,500 after the federal tax credit. One could buy a well-equipped Chevy Malibu with a mild-hybrid engine for less than that.
"It's exactly the same here," Chow said of China. "Even with the subsidies, the cost of EVs is way higher than a traditional gasoline-powered engine vehicle."
Tesla Motors is opening dealerships in Shanghai and Beijing with high hopes for its Model S luxury electric sedan. GM sells the Chevrolet Volt in China in limited quantities, and Chinese automaker BYD, backed by billionaire Warren Buffett, markets its own electric vehicle.
But people who can afford expensive cars in China prefer luxury gasoline-powered vehicles like BMW, Audi, Mercedes-Benz and Buick.
"Brand image is really, really important – and if you look at some of the EV choices, they're not necessarily aligned with the high-end brand image," said Steve Merkt, president of transportation solutions for auto supplier TE Connectivity, who previously ran the company's China-based Asia business.
That's why some automakers are tinkering with their electric-vehicle strategies in China. For example, BMW and its joint venture partner, Brilliance Auto, plan to launch a new electric-vehicle brand in China called Zinoro later this year.
But some automakers announce electric vehicle plans in China for show, with few intentions of following through, Chow said.
"They want to appease the government," she said.
Still, many automakers are hoping for breakthroughs from their Chinese operations. Technology developed in China can be applied to electric vehicles throughout the world.
GM is conducting EV research with its joint venture partner, SAIC, and is conducting battery cell testing, validation and chemistry research on its own at its new Advanced Technical Center in Shanghai. In a tour of the center, which finished its second phase of expansion in November, GM executives said the Shanghai facility has the same battery capabilities as the sprawling GM Technical Center in Warren, Mich.
Debbie Murphy, GM's director of China engineering, said there's "a potential" to start procuring battery cells from Chinese suppliers, too. Currently, GM gets cells from Korea-based LG Chem and turns them into battery packs at a plant in Brownstown Township, Mich.
"Batteries are a key focus for China, and that will enable them to get more electric vehicles here quicker," she said. "That's why we decided China was the right place to do this."
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