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Policies Are Clearly Inclined to Support the Development of the New-energy Vehicles, While the Bottleneck of Charging Piles Brings along with it New Opportunities
2015-03-31

[Abstract] With the rapid development of new-energy vehicles, problems pertaining to the limited number of charging piles have come forth. However, this has also brought along with it potential opportunities for financing on the capital market.

In the wake of technical progressing, policy support, and investment increasing, the past two years saw a leapfrog growth in China’s new-energy vehicle sector. With the rapid development of this industry, however, problems pertaining to the limited number of charging piles have come forth. Nevertheless, this has also brought along with it potential opportunities for financing on the capital market. Analysts point out that,China’s industrial policies are clearly inclined to support the development of the new-energy vehicle sector focusing on BEV. That means there might be a climax of building charging piles in the days to come, bringing related public companies with greater financing opportunities.

With the leapfrog development of new-energy vehicles, charging piles have turned out to be a restraint factor.

Since 2013, new-energy vehicles inChinahave entered the industrialization age. Sales of new-energy vehicles inChinahave increased significantly since the beginning of this year. According to statistics, as of the first half of this year, sales of new-energy vehicles add up to about 60,000. The soaring sales are strongly supported by the policy.

On September 16, the Ministry of Transportation issued the Implementation Opinions on Accelerating Promotion and Application of New-energy Vehicles of Ministry of Transportation (Exposure Draft). According to the document, by 2020, the new-energy vehicles would grab a part of the transportation industry, being 300,000 sets. Ministry of Transportation gives strong support for the new-energy vehicles in three major fields, prioritizing its application in urban public transport, taxi and urban logistics. To this end, research reports of Minsheng Securities points out that, to actively take measures to support the development of electric cars would work for lowering the use cost of electric cars, and for encouraging consumers to buy and use electric cars and promoting application of electric cars. The continuous issuance of policies about new-energy vehicles, including policies of reducing purchase tax for new-energy vehicles, purchase plan of new-energy public vehicles and the Guidelines of Accelerating Promotion and Application of New-energy Vehicles, will constantly speed up the industrialization of new-energy vehicles.

Local policies supporting the development of new-energy vehicles have been introduced continuously. For example, on September 24, Taiyuan government issued the Implementation Plan for Promotion and Application of New-energy Vehicles of Taiyuan City, putting forward that a BEV can enjoy subsidy as much as RMB80,000. To be specific, to promote the new-energy vehicles, for BEVs, plug-in hybrid cars and fuel cell cars enjoying national subsidy and included in the subsidy range of the central government, the national subsidy is based on the basic price difference between the new-energy vehicles and the traditional cars of the same type. The highest subsidy for BEVs is RMB60,000, and for plug-in hybrid cars, RMB35,000. In addition to national and provincial subsidies, BEVs in Taiyuan would enjoy RMB20,000 “fixed-standard” subsidy, and changing the fuel cars to BEVs is subsidized RMB3,000. For electricity price of electric cars, concerning departments would make pricing policies and mechanism of BEV charging service for civil use, to ensure that the use cost of electric cars is significantly lower than that of fuel vehicles (or lower than that of gas vehicles). Price Bureau of Taiyuan would regularly release the guiding price for new-energy vehicle charging, and make and issue the preferential policies on annual checking fees of new-energy vehicles. For parking concessions, parking fee of BEVs parking in the public park can be reduced on conditions, and parking on the road within 2 hours can be exempted from fees. New-energy vehicles have exclusive-use number, and have green channel for obtaining number plates in the vehicle management department. Besides, auto financing companies are encouraged to issue bonds and conduct credit asset securitization, to increase the fund source to supporting purchase of new-energy vehicles by individuals.

Whereas, while both the purchase and sales of new-energy vehicles increasing fast, the development bottleneck shows up, namely, the urgent need of charging piles. According to the media, sales of new-energy vehicles in the first half of this year added up to about 60,000, but only 25,000 charging piles, the supporting facility, were sold. In accordance with the currently issued Implementation Plan for Purchase of New-energy Vehicles by Government Agencies and Public Institutions, ratio of charging jacks to new-energy vehicles should be not lower than 1:1. So, the existing charging piles are not enough for the new-energy vehicles.

Supporting policies accelerating breaking the bottleneck of charging piles

Similar to development of new-energy vehicle industry, development of charging piles needs support from the government. Notably, since the beginning of this year, the preferential policies for charging piles continue to come out. As Analysts said, that is the sound environment and opportunities for large-scale construction of charging piles.

In late July 2014, National Development and Reform Commission issued the Notice on Questions of Electricity Price Policies for Electric Cars (or the Notice), determining the supporting electricity price policies for electric car charging piles. The Notice specifies that, charging facilities in the households and residential community are subject to residential electricity price, centralized charging piles for business are subject to electricity price for industrial uses. Initial electricity fees before 2020 are exempted. Peak-valley time of use tariff policy is applied to the charging facilities. Via fiscal subsidies, free allocation of construction site for charging facilities and other measures, the local governments are working hard to reduce the operation cost, make reasonable charging service fee, ease the burden of the electric car users. To this end, research reports of Hua Chuang Securities point out that these policies are in favor of the development of charging pile industry. After issuing the Notice, implementing the supporting electricity policies, and lowering electric car use cost, the profitability of the operator is ensured, which is good for accelerating construction of charging network and development of electric car industry.

At the end of May 2014, State Grid Corporation ofChinaannounced to open the distributed power grid project and the electric car charging facility market to social capital. To be specific, individuals having a fixed carport and approved by the property management company can build a charging pile for their new-energy cars and enjoy the RMB0.5 residential electricity price. Research reports of Changjiang Securities points out that, this market opening has two significances: first, in recent years, charging facilities construction is inactive than expectations. Reasons are insufficient electric cars and monopoly of grid, leaving no place for construction of main body outside grid. This market opening will effectively accelerate the construction of the charging network and result in fast growing demand, and then drive the sales of electric cars. Second, charging equipment bidding is usually organized by the State Grid Corporation ofChina, having greatly limited the participation of enterprises outside. This market opening will increase the sales channels of equipment suppliers outside the grid and expand the market.

Analysts point out that, in the wake of the introduction of a number of policies, the development path of charging pile industry may be like that of the new-energy vehicle industry. The charging pile industry will gradually enter the industrialized development stage. According to statistics of Huatai Securities, at the end of 2012, market size of charging piles was just RMB1 billion in China, with the residual size being RMB7 billion to RMB10 billion. In the following two years, the market size will probably grow in an explosive manner, and the leaders of the industry will have an opportunity to grow strong at first.

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