Bureaucratic Roadblocks To China’s EV Plans

Doug Young

Bottom line: Bureaucracy at the homeowner level is providing a major obstacle to China’s ambitious new energy vehicle build-up plan, with new government directives unlikely to fix the problem.

A new report is showing just why new energy vehicles are failing to gain any traction among Chinese consumers, despite huge government efforts to promote the technology. The main culprit in this case is the country’s huge bureaucracy, which affects everything from the largest government programs all the way down to something as simple as installing a vehicle charger in an apartment building.

In most western cities, the installation of an electric vehicle (EV) charger at a person’s home would be a simple matter, involving a visit from a specialist to hook up the proper equipment. Apartments could be slightly more complex though still manageable, since they would involve modifications at collectively owned buildings. But in China, where most people live in apartments, the bureaucracy of installing chargers in such buildings rises to a whole new level, creating a major obstacle that’s unlikely to go away anytime soon.

The new report in the English-language China Daily starts with some sobering figures involving license plates for electric vehicles (EVs). (English article) Unlike the west, license plates in major Chinese cities like Beijing and Shanghai are quite expensive and often cost $10,000 or more, due to auction and lottery systems used to control the number of new plates entering the market. In a bid to encourage EV ownership, big cities have begun awarding new license plates for those cars at much lower prices.

Beijing launched its system in February and named an initial batch of 1,424 license winners. And yet some 980 of those or 70 percent of the total ultimately forfeited their rights to those licenses after failing to actually purchase an EV by an October 26 deadline. Of the people who gave up their licenses, more than half said they did so because there was no realistic place for them to charge their vehicles.

Welcome to the world of Chinese bureaucracy, where something as simple as installing a vehicle charger takes on new meaning in terms of complexity. Anyone who lives in China knows that most buildings have neighborhood committees that tightly control what can and cannot be done on the premises. Added to that are an additional layer of management companies at most newer buildings, which are often reluctant to do anything that could upset the status quo and draw attention from nearby police or neighborhood committees.

The result of all this bureaucracy is a state of gridlock at most buildings, whose managers suddenly become paralyzed when confronted by a resident who wants to do something revolutionary like install a vehicle charger in their parking space. Adding to the issues are the complexity of fees for electricity, since separate metering systems would have to be set up to charge individual residents for the large amounts of power their EVs consume.

In its usual authoritarian style, the Beijing city government is trying to fix the problem by ordering all new buildings in the city to install charging outlets in 18 percent of their parking spaces. That kind of target-oriented approach is typically Chinese, and leads companies and individuals to look for creative loopholes to officially meet the targets without actually advancing the real objective of the goals.

None of this bodes well for China’s EV program, and looks especially troublesome for most domestic names like BYD (HKEx: 1211; Shenzhen: 002594; OTC:BYDDF), SAIC (Shanghai: 600104) and Geely (HKEx: 175), which were pinning their new energy hopes on eventual demand from mainstream consumers. Even high-end producer Tesla (Nasdaq: TSLA) is showing some strains, as reflected by its recent program to build more charging stations. But at the end of the day a niche player like Tesla should feel less impact, since many of its affluent customers have the resources to make sure chargers get installed in their homes.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.