SMM Exclusive: E-bike Subsidy Program in Rural Areas Announced, Impact Remains to See

SHANGHAI, Mar. 31 (SMM) -- In order to maximize the positive effect of home appliance subsidy program in rural areas, Chinese Central Government decides to add e-bike on the list of products eligible for the government subsidy program in rural areas. In the future, the e-bile subsidy program will be implemented in Hebei, Shanxi, Jiangxu, Anhui, Jiangxi, Shandong, Henan, Hubei, Yunnan and Shaanxi provinces. E-bike buyers in rural areas will enjoy subsidies of RMB 260 at most. Brands and types of e-bikes which are qualified for subsidies will be ascertained through a public bidding process. 

China's automobile industry has been significantly stimulated by the Central Government's automobile replacement and subsidy program in rural areas since 2009. Meanwhile, the stimulus automobile program has also improved consumption for lead-acid batteries used in automobiles. Whether the new e-bile subsidy program in the countryside will be as successful as the automobile one? SMM contacted domestic major producers of e-bike lead-acid battery concerning the question.

According to the survey, those e-bike lead-acid battery producers generally believe that the subsidy program for e-bikes in rural areas will favor e-bike consumption, but whether or not positive impact from the incentive policy will be as strong as the automobile one remains uncertain. First, the latest e-bike subsidy program will not necessarily attract strong buying interest from the remote mountain regions in view of limitation of road conditions. Second, producers of those e-bike brands winning the pubic bidding will be the direct beneficiaries of the government e-bike subsidy program in the countryside, and accordingly lead-acid battery producers for those e-bikes qualified for subsidies will likely receive more orders and sell more products. For those e-bike producers unqualified for the subsidy program, positive impact from the stimulus e-bike policy on them will be limited. Some producers even believe that the e-bike subsidy program in rural areas will only result in changes of domestic e-bike market presence. Potential e-bike purchasers will only buy those subsidized brands, and those having no plan to buy e-bikes will not purchase e-bikes as always. Hence, overall consumption in domestic e-bike markets will not see improvement. 

In addition, e-bike producers said they will not take risks in expanding production, given uncertainties on specific details for the e-bike stimulus plan. Therefore, demand for lead-acid battery will not grow immediately. In this context, domestic lead-acid battery market will remain in a traditionally low demand period in April and May as usual. 

(Edited by SMM)