Why smog-bound Chinese cities may have a long wait for their next electric bus

China's clean vehicle promotion has progressed slowly, even in a sector that has been getting the biggest government push.

Alternative-fuel buses, including electric buses, hybrid ones and models that run on fuel cells, have been viewed as China's best chance to push its transportation sector into a cleaner path. The theory is that the government-led purchases can steer local bus systems away from drivers' and mechanics' aversion to try untested technology.

However, the share of alternative-fuel buses in the country's total fleet remains insignificant, accounting for less than 4 percent last year, according to EVhui, a Chinese business information organization.

There is no official data available on China's alternative-fuel bus ownership. The organization made its own estimate based on statistics gathered from government surveys and questionnaires with major Chinese clean bus producers.

EVhui notes that the current 4 percent is already an increase from less than 2 percent in 2011, two years after China launched a program to promote clean vehicles in the nation. Through that program, 10 Chinese cities were first selected to pilot the use of 1,000 greener cars, and later more cities followed suit.

Although China's vast market scale can translate a tiny growth into tens of thousands of units of sales, analysts say such sales are still too small to drive up the development of Chinese clean vehicle industry. Besides that, less than one-fifth of the alternative-fuel buses sold in China are pure electric or plug-in hybrids, which are considered the cleanest technologies.

Sales stymied by protectionism

There are many barriers for Chinese clean bus producers to grow their presence, not the least of which is strong protectionism from local authorities. As the bus purchasing and the charging stations they need are partly financed by cities, municipal governments have little intention to support automakers that do not contribute to the local economy.

"Protectionism exists in every aspect of China's clean vehicle sales, but its impact on the bus sector is the strongest," said Zhang Zhiyong, an independent auto analyst based in Beijing.

As Zhang explained, unlike wealthy private car owners who can opt for a certain brand even if there is no government subsidy in place, public transit agencies have to place orders on the brand that the local government favors because much of their operation depends on the support from the local government.

Perhaps because of this, BYD Auto only sold electric buses to a few Chinese cities where the company has or plans to build manufacturing facilities. While, by contrast, the company's overseas business already expanded to cover dozens of Western cities including London, Tel Aviv and Los Angeles.

Chinese leaders have urged local authorities to give up protectionism. Since last September, pilot cities included in China's clean vehicle promotion program are required to buy at least 30 percent of alternative-fuel vehicles from non-local brands. Yet, doubts over the effectiveness of that policy remain, as no details are available on what would happen if the cities failed to do so.

Encouragements and discouragements


What seems certain is China's desire to clean up its public transportation sector. Pressure is mounting for the nation to contain smog, which reached record levels in Shanghai last year and prompted many cities to introduce emergency measures, including restricting the use of vehicles on heavily polluted days. As a big share of Chinese commuters still travel in public buses, this sector was expected to help fight against air pollution.

Driven by this hope, when Chinese policymakers last year cut their subsidies for clean vehicles, public transit agencies were exempted. Instead, municipal governments in heavily polluted cities, like Beijing, promised to pour 10 billion yuan ($1.6 billion) to upgrade public buses over the next five years. If all goes as planned, by 2017, buses in the downtown of Beijing will emit no pollutants.

Still, many analysts are unsure as to what extent producers of electric buses or other technologically advanced models could benefit. One, Robbin Cheng of Shanghai's auto research firm Timer, pointed out that more than two-thirds of low-emission buses that Beijing plans to switch to will be powered by natural gas, rather than electricity or other clean fuels. That's because natural gas buses are the most readily available solution in the market, thanks to their affordable price and matured technology.

Electric buses may take years to reach that market maturity, Cheng said. For now, even after generous government subsidies, it still costs much more to drive e-buses compared with diesel-powered ones, due to high maintenance costs and poor performance.

Switching to electric buses also requires an upgrade in the public transportation system. For instance, technicians who used to fix buses with internal combustion engines now have to learn how to work with a completely different technology. Changes may also be needed in public transit agencies' operation plans, as it takes minutes for diesel buses to get refilled, while recharging electric buses can take hours.

Benefits other than sales

"If electric buses can function as well as diesel-powered buses do and can operate at a lower cost, everyone in the public transportation sector would rush to make the switch. But for now, that's not the case," Cheng said. He added that it is unlikely to see acceleration in the use of alternative-fuel buses in the coming years, unless the Chinese government can offer more attractive supportive policies.

China's green transit is largely driven by the government's supports. In the third quarter of 2013, when Chinese policymakers suspended clean vehicle purchase subsidies for a review, the sales of alternative-fuel buses dropped from thousands to hundreds, local media reported.

Yet, Chinese automakers insisted that sales are not the only standard to judge the industry's development. China's leading bus producer Yutong Bus, for one, called its alternative-fuel bus business an achievement, despite the fact that the sales of such vehicles contributed to no more than 10 percent of the company's total sales in 2013.

"China needs more clean buses is a certain trend, and the sales we made can help gain a foothold in this sector," said Wu Junjun, sales manager at Yutong's alternative-fuel bus division. Wu said that thousands of buses running on the street of China have already helped the company test its technology in the field. It has also helped get its name out there.

Yutong is so confident about the market potential that a new factory for alternative-fuel buses is already under construction. Wu said that a new research and development center will be built, too, with pure electric and plug-in hybrids among the targeted models.

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