Government Researcher Questions New-Energy Vehicle Sales Target

China’s central government may set a target for new-energy vehicles to account for 25% of all car sales in the country by 2025, but some suggest policies focusing too much on sales targets will lead to disappointment.

The Ministry of Industry and Information Technology (MIIT) called for public comment on a draft new-energy vehicle industry development plan on Dec. 3. The plan calls for new-energy vehicles to make up 25% of total auto sales by 2025, among a range of other industry goals for 2021-2035. The plan is more ambitious than an earlier 2017 policy which set goals up to 2025, calling for new-energy vehicle sales to reach 2 million units in 2020 and account for 20% of the auto industry’s total sales by 2025.

While such targets are a consistent feature of China’s economic policy, some argue they are not the most efficient choice. Wang Qing, deputy director of a research institute in the State Council’s Development Research Center, which provides research and advice to policymakers, says that government policy should not obsess with targets like sales. Policy should focus on “ensuring systems and resource allocation are done well. In the end, sales will be what they are,” he said.

Wang argues that while the MIIT plan provides clear sales and research and development goals, the new-energy vehicle industry needs deeper, more systematic planning. For example, “how to invest in scientific research, how to cultivate companies, how to guide consumption, how to lay out overseas markets; only by doing this can we provide clearer developmental direction,” he said.

Wang points out that “one-size-fits all” policies can end up costing too much to deliver too little.

Despite state efforts to develop the electric car industry, it has struggled to stand on its own two feet since subsidies have been scaled back. Sales of new-energy vehicles — which include all-electric vehicles, fuel-cell autos and plug-in hybrids — slumped 43.7% from a year earlier to 95,000 in November, and the sales for the first 11 months of this year came in just over 1 million, well below Beijing’s target for next year.

The state began gradually scaling back subsidies in 2017, but cut them sharply earlier this year, after it was revealed that some companies took advantage of the funding scheme by inflating their sales figures or producing very cheap, low-quality cars.

That’s undermined growth, prompting top Chinese electric-car maker BYD Co. Ltd. to warn in September that its earnings will wane. Wang thinks that given the results, subsidy policy is worth questioning. In his view, subsidy adjustments produce uncertainty. “Manufacturers may not be able to predict what will happen or know how to react. They may struggle to decide between investing, or waiting to see what will happen,” he said.

If subsidies could be set in accordance with sales of new-energy vehicles rather than a fixed number, the situation would change, he added.

Contact reporter Yutong Lu (yutonglu@caixin.com)