Chinese cities open up green car markets

Local subsidies

The government has vowed to fight pollution and since 2010 has been encouraging consumers to buy green cars. Under its latest initiative, it offers to pay up to 60,000 yuan of the purchase price - an amount local authorities are encouraged to match.

Shanghai, before last month, only subsidized NEVs satisfying criteria such as the ability to reach 50 km/hour in 6 seconds, met only by models from Shanghai-based SAIC and Shanghai Zhongke Lifan Electric Vehicle Co Ltd.

Lack of charging devices deter electric car buyers

Tesla to raise $1.6b to build battery factory

In Beijing, the inability to obtain license plates for e-cars prior to February meant the BAIC E150 of local maker BAIC Motor Corp Ltd came up against limited competition on its official release this month.

However, in September the central government said non-local cars should make up at least 30 percent of a city's NEV sales.

In Tianjin, the authorities only opened the market to green cars in January after BYD agreed to build an electric bus factory in the city.

"Given the current situation in promoting NEVs, it's necessary for the company to make some investment when needed in exchange for access to new markets," BYD said in an emailed statement to Reuters.

Foreign onslaught

The opening up of city markets is likely to support China's fledging electric car industry before an inevitable onslaught from foreign brands, most of which will not be eligible for subsidies.

Tesla Motors Inc is taking Chinese orders for its Model S, BMW aims to import its i3 this year, and Volkswagen AG plans to sell more than 15 models in China by 2018.

Unlike the luxury cars of Tesla and BMW, Chinese models are aimed at the lower-priced end of the market. But even with subsidies, prices are high.

IT engineer Zhang Shuai, 32, paid 240,000 yuan ($38,800) for a BYD e6 after receiving 114,000 yuan in Beijing and central government subsidies this month. China's top selling petrol car, Ford Motor Co's Focus, costs half as much.

"Most of my friends and relatives were opposed to me buying the e6," said Zhang. "I'm a fan of electric vehicles, but many people in China are still skeptical."