UPDATE 1-Beijing Auto's new energy unit plans IPO in 2018 -group chairman

Yawen Chen and Jake Spring

(Corrects to read 15-20 percent, paragraph 3)

BEIJING, March 6 (Reuters) - The green energy car subsidiary

of Chinese automaker Beijing Automotive Group plans

an initial public offering in 2018, Chairman Xu Heyi said on

Monday, adding that the unit should be profitable that year.

China has aggressively promoted battery electric and plug-in

hybrid cars, including spending billions of dollars in

subsidies, in an effort to cut heavy urban smog and promote

technological innovation in its auto sector.

Xu said battery production costs for Beijing Electric

Vehicle Co, which is backed by the group's listed subsidiary

BAIC Motor Corp, are dropping by 15-20 percent per

year.

While the central government is phasing out green car

subsidies through 2020, the firm will need government support

for only three more years at most, he said.

Xu ruled out as "totally impossible" any risk that the new

energy vehicle industry would fall off a cliff when the

government withdraws support.

(Reporting by Yawen Chen and Jake Spring; Editing by Ruth

Pitchford)