Tesla Model S-05

Seen or experienced Beijing’s infamous smog before? The locals may be used to the grey blanket, but it’s a worrying matter nonetheless. China is working to alleviate the issue and one of the measures is to waive a 10% sales tax on electric cars to fight pollution, Bloomberg reports.

New-energy autos (the term for EVs in China), plug-in hybrids and fuel-cell vehicles will be excluded from the levy from September 1, 2014 till the end of 2017, according to a statement posted on a central government website, citing a State Council meeting led by Prime Minister Li Keqiang.

Supporting a strategic and emerging industry like new-energy vehicles is a “win-win” for industrial development and environmental protection, the Chinese government said in the statement. Developing new-energy autos is important for spurring innovation, promoting energy savings and reductions in emissions, and will help to drive domestic demand and nurture new avenues of growth, the notice added.

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The tax waiver also applies to imported EVs, so companies like Tesla Motors, BMW and Volkswagen will benefit from it. Tesla began deliveries of its Model S sedan in China this year, BMW will start sales of its i8 and i3 in September, while VW plans to offer an electric version of its up! small car in the Middle Kingdom by the end of this year.

Sounds good, but will it work? China’s central and local governments have funded purchases of new-energy vehicles since 2010, offering subsidies of up to 114,000 yuan (RM58,570) off the price of an EV in Beijing. Despite this, there are fewer than 70,000 EVs on Chinese roads five years after the programme started. The government target was 500k by next year.

“The exemption will help spur demand by lowering the purchase cost. Still, it remains to be seen whether the latest measure will have a decisive impact given other types of funding have been in place,” said Han Weiqi, an analyst at Shanghai’s CSC International Holdings.

Renault Twizy MY 8

The lukewarm demand could be down to charging and range. Traffic jams of epic proportions are common in China, and an EV might not survive the daily battle.

“The State Council is putting electric vehicles high on its agenda because they not only save energy but also avoid atmospheric pollution. Senior officials from the State Council are working on that and I believe very soon there will be more preferential policies for electric vehicles coming out,” said Wan Gang, China’s science and technology minister.

More government support is needed to develop the infrastructure required to promote EV usage, such as building more charging stations that are conveniently located, the minister acknowledged.

Should Malaysia offer incentives to EVs in the same spirit? This year’s NAP 2014 saw the discontinuation of tax incentives for CBU fully-imported hybrids and electric cars, signalling the “death” of the Mitsubishi i-MiEV and Nissan Leaf. The Mitsubishi Outlander PHEV, already in Malaysia for trials, is also in limbo as a result.