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Chinese city offers hybrid subsidy to boost sales

New-car buyers in China are very price-sensitive, this attitude has caused hybrid sales to stagnate in the country, due to the high sticker price. The city of Guangzhou is now offering price subsidies to try to boost sales of the cars.

By John VoelckerGuest blogger / August 17, 2012

In this Jan. 2010 file photo, a man looks at Honda Motor Co.'s Civic hybrid cars in front of the Japanese automaker's headquarters in Tokyo, Japan.

Koji Sasahara/AP

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Several years ago, you could get a Federal tax credit for buying a hybrid-electric vehicle.

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That program has ended. Several manufacturers--ToyotaHonda, and Ford among them--reached their cap of 60,000 hybrids sold, and now hybrids represent 2 to 3 percent of the U.S. market without Federal incentives.

The goal of the program was to encourage sales of hybrid cars at a time when consumers were wary of the new technology.

The same logic now applies to the current Federal tax credit (and other state, local, and corporate incentives of various kinds) for purchase of a plug-in car.

Now, in the Chinese city of Guangzhou is offering a hybrid-purchase subsidy of 10,000 yuan, or about $1,730.

New-car buyers in China are some of the most price-sensitive in the world, and hybrids have stalled in the market because of their high purchase prices.

And the country's national government offers only a 3,000-yuan ($472) subsidy for buying a hybrid--versus 50,000 yuan ($8,650) for a plug-in hybrid and 60,000 yuan ($10,380) for a pure battery-electric vehicle.

The goal of the local incentive is to boost sales of hybrid vehicles--which are, as Automotive News China notes, the flagship products of two automakers whose Chinese headquarters happen to be located in ... Guangzhou Province.

And adding to its push, the city will restrict the number of new-car registrations to 120,000 per year--but will reserve 10 percent of that number for "new energy vehicles," including hybrids, plug-ins, and electric cars.

In effect, then, hybrids are exempt from the restriction. That is likely to make them look a lot more attractive to Guangzhou buyers.

The subsidy doesn't totally make up for the price difference between a gasoline and hybrid model, which on the Toyota Camry is about 25,000 yuan.

But Honda and Toyota plan to start building hybrid components like battery packs and electric motors in China, and using them in locally assembled hybrid cars.

That could bring the cost differential down enough that with the local incentive, hybrid prices would be competitive.

Perhaps cars that can get around the registration limit in Guangzhou (and other Chinese cities, including Beijing) will become the equivalent of the much-desired plug-in cars now eligible for single-person travel in California's High Occupancy Vehicle lanes?

The Christian Science Monitor has assembled a diverse group of the best auto bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

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