Tuesday 27 July 2010. The Green Piece Column
According to a report by business daily The Nikkei (see article), Japan, once the clear leader in the green car race, now needs to learn from its rivals in the USA and China to keep pace with the electric vehicle revolution.
It suggests that Japan’s leading automakers Toyota and Honda risk being left behind in the push to establish battery electric cars because they have focused so heavily on hybrids. Meanwhile, Government incentives in the US and China have left those countries well-placed to capitalise on this emerging market, particularly in China where manufacturers effectively skipped past hybrid cars to focus on battery powered electrics.
However, is it true that Japan is now trailing its rivals? Here we look at which country is poised to race ahead with electrification.
USA
Much of America’s push towards electrification has emerged since the start of the Obama Administration. The President announced $2.4billion towards electric vehicles with $1.5billion to go to US manufacturers for highly efficient batteries and their components; up to $500million in grants to produce other electric car parts; and around $400million to evaluate plug-in hybrid electric vehicles.
Further funding has been made available through the American Recovery and Reinvestment Act with the US Department of Energy committing around $2billion for the manufacturing of advanced batteries; with a further $400million for transportation electrification.
There is support for electric car buying too, with qualifying vehicles eligible for a one-time tax credit worth 10 per cent of the cost of the vehicle up to $4,000. A tax reduction up to $100,000 is also available for electric vehicle recharging property used as part of a trade or business. This was followed by The House of Representatives passing legislation in 2008 for tax credits ranging from $2,500-$7,500 for electric vehicle buyers. Both the Chevrolet Volt and the Tesla Roadster are eligible for the full tax credit.
CHINA
Now established as the world’s largest automotive market, China is widely viewed as a potential hotbed for electric car manufacturing after Chinese officials outlined their intent to turn the country into the world’s largest electric car producer.
With many first-time buyers in the country less accustomed to the power and performance of petrol engines, China is attempting to lead the way by pouring around 10billion yuan to assist with automotive innovation. In 2010, it also outlined plans for a two-year pilot to subsidise alternative energy cars across five major cities – Shenzhen, Hefei, Hangzhou, Changchun and Shanghai. The subsidy will be as high as 60,000yuan for battery electric cars and 50,000yuan for plug-in hybrid electric vehicles.
Perhaps China’s biggest stumbling block is that it doesn’t have its own manufacturer with an established international reputation. However, there are several home-grown manufacturers emerging that are focusing their efforts on electric vehicles, such as BYD Auto which delivered 48 F3DM plug-in hybrid vehicles in the country during 2009.
However, even without established names in the marketplace it is attracting international investment with Nissan’s chief executive Carlos Ghosn stating that the manufacturer could bring production of the LEAF to the country if substantial purchase incentives are offered to buyers.
JAPAN
Despite its leadership in the green car race with hybrid cars such as the Toyota Prius and Honda Civic, Japan has taken its time to commit to battery electric vehicles.
It wasn’t until June 2009 that purchasers of the Mitsubishi i-MiEV were granted subsidies of around 3.209million yen, slashing around 30 per cent off the purchase price. Electric cars, along with hybrids, are also exempt from taxes for three years in Japan.
However, while its subsidies may trail those in other countries, Japan has still produced some of the most successful early versions of the electric car including the i-MiEV and the Nissan LEAF, which is to be the first mass-produced electric car.
OUR VERDICT
With all major car makers now working on next-generation electric vehicles the picture as to who has the lead in the electric car race should become much clearer over the next few years.
However, for now both the US and China have quickly made ground on Japan by strongly backing electrification with Government support. The incentives in China in particular, coupled with its position as the most rapidly developing economy in the world, have made it attractive to international automakers and it is likely to play an increasingly significant role in the marketplace going forward both in terms of home-grown production and its influence on overseas design and manufacturing.
Japan meanwhile, has arguably lost ground because of the pressures of maintaining its market-leading position. The likes of Toyota and Honda can’t afford to abandon the short-term to focus their programmes purely on long-term production and so there has been added emphasis on hybrid cars in the interim. However, their strong market position and reputation should bring them up to speed quickly and with increased government support anyone who is writing off Japan in the electrification race will surely be forced to think again.
Check back next week for an in-depth look at the European Union’s contribution to the electric car race.
Faye Sunderland
