In an attempt to clear the air, China has issued a ruling that requires 30 percent of all government vehicle purchases to be for alternative energy vehicles by 2016. The country’s multi-year subsidies and other incentives for energy-efficient vehicles will provide the alternative energy market with a much-needed boost.

 

Under the new regulations, which will be phased in over two years, subsidies will be offered to government and public agencies for vehicles costing less than 180,000 yuan (US$29,186), including subsidies. Furthermore, as infrastructure for alternative energy vehicles is not as prominent as infrastructure for gasoline vehicles, local governments will be tasked with putting in place new energy-vehicle charging facilities.

 

According to Hong Kong-based Barclays (LSE:BARC) analyst Yang Song, China’s plan is a “laudable aspiration.” Song estimates that government purchases account for about 10 percent of total new vehicle sales in China, noting that “government purchases are not growing as fast as private consumption. So just to rely on the government purchase would be a challenge.”

 

The latest announcement comes shortly after last week’s notice that individual buyers will be exempt from a 10-percent vehicle tax when they purchase electric and other non-polluting vehicles.

 

With battery-powered, gasoline-electric hybrids, fuel cells and other non-polluting vehicles encompassed in China’s plan, the expectation is that the automotive industry will get a much-needed boost from increased vehicle sales.