China Autos & Auto Parts:Beijing Announces New NEV Subsidies

Quick Comment – EVs are major beneficiaries:Beijing transport authority announced news subsidiesfor new energy vehicles (NEVs) on Tuesday, which areequally shared by the central government and Beijingmunicipal government. The new subsidies are mainly forEVs and based on mileages per single charge:

    Given most EVs are selling above Rmb200k in China,the new subsidies are likely to significantly reduce theirretail prices to a similar level to low- to mid-endconventional vehicles and thus encourage their sales.

    20,000 new license plates for NEVs: Beijing will alsoissue 20,000 license plates for NEVs in 2014. People inthe lottery for conventional license plates will have towithdraw their application to join an independent lotteryfor the NEV license plates. Given the Beijing’s annualquota of new car license plates had already beenreduced to 150k from 240k, we believe the NEV licensequota will stimulate local EV sales.

    Only domestically-made models will benefit: A list ofNEVs that are qualified for the new subsidies will bereleased in February, which only includes China-mademodels. We believe domestic EV makers such as Fotonand BYD will benefit from the subsidies.

    Infrastructure remains a key challenge: CurrentlyBeijing has 75 charging/battery exchange stations thatcan only support a maximum 15,000 charges per day. Itaims to expand its EV fleet to 180k units by 2017 butwithout an aggressive expansion plan for chargingnetworks. We expect insufficient infrastructure to remaina key obstacle to fully commercializing EVs in the nearterm and therefore maintain our EW rating on BYD.