29 May 2012
Mainland Chinese and Hong Kong Companies Show Little Interest in Alternative-fuel Vehicles
The latest Grant Thornton International Business Report (IBR) reveals that only 7% of companies in mainland China and 12% in Hong Kong are considering vehicles that run on alternative fuel for their business, lagging far behind the global average of 24%. Companies are a powerful consumer group and if there is to be continued investment in alternative fuel vehicles, this shortfall in enthusiasm in Hong Kong needs to be addressed.
Hong Kong businesses are less likely to buy alternative-fuel business vehicles compared to other countries
The IBR survey shows that businesses in Asia Pacific are most likely to consider alternative-fuel vehicles. The top three most interested countries globally are Japan (48%), Malaysia (46%) and the Philippines (46%), demonstrating higher interests than European countries and the United States of America, which are often considered to be more committed to sustainable practices and environmentally conscious. Though Hong Kong has branded itself ‘Asia’s World City’, it is comparatively more conservative with only 12% of businesses showing interest in alternative-fuel vehicles.
Price of oil (58%), tax relief (42%) and cost management (34%) are the key drivers of demand for alternative-fuel vehicles; where 33% of Hong Kong businesses also identified ‘saving the planet’ as a driving demand.
There is still obvious room for the Hong Kong Government to enhance the promotion and development of alternative-fuel vehicles. Policy-makers should comprehensively evaluate the current situation from technological research, to marketing and proactively advocate and support the sustainable development of the industry; as well as providing local consumers with more environmentally-friendly alternatives.
Insufficient alternatives affect Hong Kong businesses’ purchase decision
In Hong Kong, the majority of taxis and mini-buses are fuelled by LPG (liquid petroleum gas). Since 2010, the government has introduced profit tax incentives for any purchase of certified environmentally-friendly vehicles. It shows the government’s commitment to introduce encouraging policies to promote the development of alternative-fuel vehicles.
However, for corporate users, lack of choice (41%) for the alternative-fuel vehicles is the major factor preventing them from buying. Safety (84%) and reliability (81%) are still the most crucial criteria in companies purchasing decision, followed by performance (69%) and cost (68%).
Facilities and tax incentives affect mainland Chinese businesses purchase intention
Businesses in mainland China cite difficulty in charging/refuelling (27%) as the top reason that prevents the adoption of alternative-fuel vehicles, according to the IBR findings. This suggests that supporting facility constraints contribute the most in sluggish sales of the alternative-fuel vehicles among businesses. The top drivers for buying alternative-fuel vehicles are “saving the planet” (78%), “internal brand” (72%) and benefits from “tax relief” (71%). The survey findings reveals that businesses considered tax relief as a key driving demand, showing that government policies would greatly affect companies’ purchase will. The newly released ‘Energy-saving and new energy automotive industry development plan (2012-2020)’ reflects the Chinese Government’s determination on energy saving and emission reduction. The plan outlined the subsidy pilot programme for private owners of alternative-fuel vehicles and the installation of more charging facilities, along with the release of supporting financial policies. Despite the low business interest in mainland China at present, we believe that the purchase intention will be higher upon the improvement of related facilities and the introduction of more supporting policies.
The Chinese Government is determined to develop alternative-fuel vehicles, but it will take time to improve the vehicle performance and grow consumer acceptance. Greater government support should be given to facilitate the research and development by automotive manufacturers. At the same time, manufacturers should also invest more capital and resources in order to accelerate the technology development.
One-fourth of global companies are interested and Japan tops the list
Around a quarter of global businesses (24%) have considered buying alternative-fuel vehicles while almost half of the businesses in Japan (48%) are likely to use the vehicles, ranking the top. As many as 31% of businesses in ASEAN region (Malaysia, Philippines, Singapore, Thailand and Vietnam) are most likely to introduce or consider alternative-fuel vehicles. Other regions such as G7 (Canada, France, Germany, United Kingdom, Italy, Japan and United States), Nordic and North America also present a relatively high percentage of interest with 28%, 27% and 26% respectively.
Japan is the first country to initiate the research and development of alternative-fuel vehicles and its government provides full support to the industry. Since 2008, Japan has been establishing vast electric car charging, jointly developed by the government and automotive manufacturers, and there are several thousand stations now in operation within the country. What’s more, the users of alternative-fuel vehicles also enjoy tax deduction under Japan’s ‘green tax’ incentives. These facilities and the strong support from the government have resulted in rising business interest in switching to alternative-fuel vehicles.
Grant Thornton’s report, “Greener fleets: companies consider alternative-fuel vehicles”, is now available at http://www.grantthornton.cn/web/en/press/ibr/2012.