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On 16 September 2020, China's Ministry of Finance, along with
four other government agencies, issued the Notice of Launching
Demonstration Applications of Fuel-Cell Vehicles. The new policy
replaces the previous direct subsidy mechanism scheme on fuel-cell
electric vehicle (FCEV) sales and will reward eligible city
clusters for the development of the FCEV wider value chain. The
central government has supported the development of FCEVs since
2009 by subsidizing consumers, but economics still hinder this
market development. As of June 2020, China had fewer than 7,000
FCEVs in operation. In comparison, the development of battery
electric vehicles (BEVs) has far exceeded that of FCEVs despite
declining subsidies. Since the subsidy scheme on vehicle sales has
not produced significant results, the government shifted the
approach to incentivizing breakthroughs in key core technologies
and industrialization of basic materials to improve economics
across the FCEV entire value chain. This is a Chinese "crossing the
river by touching the stones" approach typical for developing a new
field—proceeding cautiously and making adjustments along the
way.
The Notice stated that the demonstration clusters should include
outstanding enterprises across the industry value chain regardless
of the physical locations. The demonstration clusters should
identify the lead city with a clear division of tasks and
coordination plans. By 15 November 2020, lead cities should submit
applications and implementation plans to the five agencies that
issued the Notice. As of 15 November 2020, 15 clusters have
submitted applications, but no results or timetable of assessment
results has been announced. The first batch of demonstration
projects will likely be based in Shanghai, Jing-Jin-Ji, Guangdong,
Shandong, Sichuan, Chongqing, and Hubei, given that they have
relatively complete industrial chains and comparably abundant
research and development resources.
Demonstration clusters will be evaluated for a subsidy grant for
four years on a variety of factors based on a point system.
Specifically, each point is worth 100,000 yuan of subsidy. The
upper limits per cluster are set at 15,000 points for FCEVs and
2,000 points for hydrogen supply, equivalent to a maximum four-year
subsidy of 1.5 billion yuan and 200 million yuan, respectively. The
point standards will decline year by year. When the demonstration
period is up, extra subsidies up to 10% the original amount will be
granted to clusters that surpass the targets. The government will
adjust subsidies midway through implementation depending on each
cluster's implementation progress. If the government approves the
seven city clusters that are considered comparably advanced in FCEV
development, the total government funding could be as much as 11.9
billion yuan ($1.7 billion) over the next four years.
The FCEV industry will play a vital role in China's energy
transition and technological ambitions. Low-carbon hydrogen and
applications including in the transport sector can help China
achieve the net carbon neutrality goal by 2060. In addition, the
FCEV industry is at an early stage of development, both in China
and globally. Developing this new market segment can help China
solidify its position as a global technology powerhouse.
