Recommended by Ricochet Members Created with Sketch. Communist China Gets a Lesson in Free Markets

 

But do they understand that the effects of their policy are due to the operation of a (relatively) free market? Here is a quote from an article in the Wall Street Journal, titled “Tesla says China output hits target.”

…in China, electric-vehicle sales in the country have been cooling rapidly since the government reduced most subsidies at the end of June.

Sales of alternative-energy vehicles dropped for the fifth consecutive month in November, down 44% to 95,000 vehicles. The remaining national subsidies are set to be eliminated by the end of 2020.

This effect has been noted in the United States also, where when sales of electric vehicles hit a certain quantity, government subsidies (in the US, tax credits) start to disappear. And, predictably, fewer are sold after this.

I wonder how many electric vehicles would be sold if there were no government subsidies from the start.

Published in Economics
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There are 4 comments.

  1. Ray Kujawa Coolidge

    At 12:10 in this video about Shenzhen (“City of the Future”) published in 2017, buyers of electric cars in China did receive subsidies the equivalent of $4,300 and $5,000 from the national and the city governments respectively.

    • #1
    • January 5, 2020, at 2:41 PM PST
    • 2 likes
  2. Phil Turmel Coolidge

    RushBabe49: I wonder how many electric vehicles would be sold if there were no government subsidies from the start.

    Not a whole lot.

    • #2
    • January 5, 2020, at 3:20 PM PST
    • 4 likes
  3. DonG (skeptic) Coolidge

    RushBabe49: I wonder how many electric vehicles would be sold if there were no government subsidies from the start.

    It is not a market decision, but a government quota system that is pushing EVs. If you want to drive a car in a big city in China, then electric will enable you to hit the road much faster.

     

    Like Zhang, fellow Beijinger Li Fang was persuaded to buy an EV by the near impossible odds in the public lottery for license plates for petrol vehicles. At least 2.72 million people are registered in the lottery competing for just 90,000 licenses. Li had taken part since the lottery’s 2011 launch, but with no luck. “So I had no choice but to look at an EV,” she told a low carbon seminar in August.

    By contrast, EV licenses are not awarded by lottery but through queuing. However, as the EV market becomes more established, it too is facing license plate scarcity. An annual quota of 51,000 private car licenses (excluding taxis, trucks and government cars, etc.) was exhausted in August, leaving 4,644 applicants having to wait until 2017.

    Beijing’s 2016 quota for EVs was 40% of its total new car license plate quota. This is likely to increase, with further cuts due in the quota for traditional-fuel vehicles, and EV buyers anxious to purchase before expected reductions in subsidies happen for domestically produced EVs.

    • #3
    • January 5, 2020, at 3:21 PM PST
    • 5 likes
  4. RushBabe49 Thatcher
    RushBabe49

    Proves my point, thanks @dong. Most folks would not drive an “alternative-fuel” vehicle without government demanding it. I resent the government, which should be my “servant” (you know, that “consent of the governed” thing), becomes my master, and dictates to me what vehicle I will drive.

    • #4
    • January 5, 2020, at 3:25 PM PST
    • 7 likes