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Pure EV lured by wealthy Chinese markets

The official China Securities Journal cited an unidentified source and said that municipal government of Shenzhen would purchase another 1000 units of pure electric vehicles (pure EV) to operate as buses, in an effort to boost the city’s capacity of public transport. The Shenzhen-based BYD Auto Co., Ltd (002594.SZ), leading domestic company in the area of electric vehicle (EV) industry, is widely expected to gain a massive order from the local authority. According to the previous plan, the Shenzhen municipality is supposed to buy 500 units of E6 model pure EV from the BYD company, serving as taxis in the city.

Since this practice is in the local public transport system, markets had tested for the reliability, stability, as well as economy of the pure EV in the model of K9 and E6. Markets also believed that the local government’s purchase of new energy cars would only center in the area of pure EV from the next year. As the supporting infrastructure, the electric vehicle charging station will be built without problems and the charging stations for the newly operated taxies will be conducted and maintained by the China Southern Power Grid.

Key issues ahead for the Shenzhen municipality to realize all-electric vehicles in its public transport have been broken through. In other words, the city is forging ahead into an era to experience commercial uses of pure EV in a large-scale. Analysts, therefore, indicated that with resulting economic proceeds and existing social effectiveness, the upgrade and restructuring of pure EV will eventually be seen in the national public transport system.

Back to 2009, China launched stimulating policy in the form of fiscal subsidy and planned a three-year scheme to develop 10 cities in each year with 1000 units of new energy vehicles respectively, as an exhibition of operation, regarding areas such as public buses, government affairs, municipalities, post offices and so on.

Across the country, cities such as Beijing, Shanghai, Shenzhen, Changchun, Hangzhou, Hefei, Changsha, Kunming and so on, came on the list of 25 trial cities to participate this three-year scheme. Duringlast three years, these cities ramped up the operation ofnew energy cars significantly to prompt its application, mainly including sectors of hybrid vehicles and pure EV. Shenzhen, as one of the trial cities, deeply advanced their applications in the areas ofnew energy vehicles and broke ground the floor of large-scale commercial operation of pure EV public buses and taxies.

Statistics from the Shenzhen Development and Reform Commission revealed that, until the end of July this year, new energy cars served in the city reached the total number of 3147 units. Among it, there were 2050 units as buses (including 1771 hybrid vehicles, 253 pure EV, another 26 middle-sized pure EV buses), 300 units of pure EV taxis, 62 units of fuel cell battery vehicles, 20 units of government vehicles, along with over 751 units of household vehicles.

On February 26 2010, Shenzhen Bus Group, together with BYD Auto, jointly set up China’s first pure EV taxi company. This joint venture enjoyed 20 million registered capitals, with Shenzhen Bus Group accounting to 55% of the stake and BYD Co of 34 percent. The latest data disclosed that 300 units of pure EV operating taxis till date had travelled a combined mileage of over 25 million kilometers, or more-than 220 thousand kilometers per unit. After two-year market operation, this joint venture had gradually turned to create profits, from its 7 million yuan loss in the very first year.

In the other area of new energy vehicle applications, Shenzhen government also implemented marketization in pure EV public bus system. Different from the joint venture of EV Taxi Company, the local authority carried out the model of so-called “leasing by financing with separation of vehicle and battery”.

According to the report, one unknown Shenzhen government officer elaborated that the Shenzhen municipality government, via the operation model of franchise, brings China Potevio into the city’s new energy vehicle industrial chain, functioning as a operator, for the latter can provide guarantee in order to access bank credits. China Potevio takes the responsibility to purchase batteries, leasing company to buy leafing parts of EV, and pubic bus company will rent the whole unit of EV for a period of 8 years. These three parts, accordingly, will share distribution of proceeds.

For the 8-year operating period of time, after the 4-year warranty period promised by the battery manufacturer, China Potevio is responsible for the usage and maintaining of the battery.
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