Economics should be open

April 3, 2009

Why Chinese Electric Cars are different

Filed under: China, Data Insights, Energy — howardchong @ 7:10 am

NYTimes just reported that China’s going gangbusters on electric car development:

Are they going to win with stolen foreign patents? Or putting up trade barriers? Or just win with their extremely cheap labor.

Nope. That may be some of it, but one big issue is the price of electricity. Electricity is cheap in China.  There are probably lots of reasons why electricity in China is cheap, but one binding reason is that the state sets price controls. And, as well as I can tell, the going price for electricity in China is 7.7 US cents per KWH or US$70 per MWH. This is the retail rate. Compare this to the US price of about 10 US cents + taxes. Or an average price in the OECD of 14 US cents (including taxes)  (SOURCE: OECD/IEA, ENERGY PRICES & TAXES, 4th Quarter 2008) Even Norway, the lowest price country, is charging 9 US cents.

Note that the government subsidizes the price of electricity. China doesn’t have a leg up on efficient plants, and it is a coal importer. Nevertheless, the retail rate is low. And that makes a difference.  Gas prices are subsidized too, but I am guessing that electricity is a much cheaper fuel from the consumer’s perespective. And there’s enough labor and competition in China that the cheapest fuel should win (if the government allows it).

Too bad it won’t be good for taxi drivers — they’ll need a car they can drive 24 hours a day. But maybe short haul deliveries. Or maybe the Chinese will actually do the battery swapping needed to keep these puppies going all day.


NOTE: I had a hard time finding a retail price for China. I found a CCTV9 broadcast from summer 2008 that said an increase of 2.5 cents Yuan was going to be instituted and that this was going to be a 4.7% increase. So I did the math and used the current exchange rate of 6.8 Yuan = 1USD. 

Data is probably available from here:

But that’s only available on CD and not via download.


1 Comment »

    Got the yearbook. Table 6C.9.1. Beijing Grid Electricity Rate Schedules (continued)

    Residential Wholesale is about 0.3 yuan/kwh
    Or 5 UScents per kwh.

    Residential (pg96) shows 0.36 yuan/kwh, or 6 cents per kwh.

    Comment by howardchong — April 7, 2009 @ 9:06 pm

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