China Spending $15 Billion on Electric Car Project

Mindful of the ecological toll that gasoline and diesel engines exact on the environment, the Chinese government is pressing forward with plans to build 1 million electric vehicles a year by 2020, according to the Xinhua news agency.

Citing comments Saturday from the country's minister of science and technology, Wan Gang, Xinhua reported that environmentally friendly vehicles are essential for the development of the auto industry in China, where vehicle emissions account for 70% of the air pollution in major cities.

The ministry's plan calls for it to soon issue a framework to help bolster electric-vehicle production during the next five years, Xinhua said. China's government plans to spend 100 billion yuan ($15 billion) in the next 10 years to subsidize the effort, which includes building plants and infrastructure to accommodate green vehicles.

Capital markets have already invested 8.5 billion yuan in electric vehicle production, Gang said, but more is needed.

Growth -- and Subsidies

"As the world's largest auto market, new energy vehicles are key to the development of China's auto industry," he said. Chinese demand for cars and trucks has continued to grow rapidly, with sales up nearly 48% during the first half of 2010.

China also has a pilot program operating in 25 cities to provide consumers a subsidy of 60,000 yuan -- about $9,000 -- to purchase a zero-emissions vehicle.

In August, 16 Chinese state-owned enterprises established a consortium of electric-vehicle manufacturers, AutomotiveWorld.com reported. The group's goal is to unify and consolidate existing technologies and coordinate efforts among the various companies.

The world's second largest economy is also looking for ways to "de-carbonize" its electricity production as demand for electric vehicles -- and thus electricity -- heats up, according to Nobuo Tanaka, executive director of the International Energy Agency. China relies heavily on coal to for electricity production.

Speaking earlier this month, Tanaka said that while the country's progress in promoting electrical vehicles was welcome, "China's problem is how to supply electricity carbon-free."