China makes deep cuts to EV subsidies

As was already leaked in January, the Chinese government is cutting its subsidies for electric cars this year before they are to be completely abolished by 2020. The details now published show that the cuts are even more significant than expected.

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For example, government subsidies from the Chinese central government for electric cars with a range of 400 kilometres and more will be halved from 50,000 to 25,000 yuan (6,600 to 3,300 euros). Electric cars with a range of less than 250 km will receive no subsidy whatsoever. So far, the minimum qualifying EV range had been 150 km.

In addition, municipal subsidies will also be significantly reduced and some will be completely abolished later. There will be a three-month transitional phase until 25 June, during which local governments will cut their own subsidies for electric cars to 60 per cent of the 2018 level, provided that the electricians meet the technical standards for 2019. If they only comply with the 2018 standards, only ten per cent of the previous year’s subsidies will be granted during the transition period. After 25 June, local subsidies are to be completely abolished – with the exception of electrified buses and fuel cell vehicles. The funds released by local governments will be used to improve charging facilities and other supporting services.

What does that mean in concrete terms? Bloomberg calculates that the overall reduction in subsidies would be 67 per cent if the halving of central subsidies were combined with the complete abolition of local subsidies for an electric vehicle with a range of at least 400 kilometres. This is much more drastic than industry observers have assumed. It was already reported in January that China wanted to cut its subsidies for electric vehicles sharply. But not to the extent that has now become public. At the beginning of the year, there was still talk of an approximately 30 per cent reduction compared to the subsidies granted in 2018.

It is well known that China’s lavish subsidy programme had led to widespread misuse of subsidies. In 2016, a total of 25 car manufacturers were suspected of having committed fraud with subsidies for electric cars. Since then, the Chinese Ministry of Industry has “cleaned up” the list of eligible models several times – for example in May 2018 and September 2018.

Update 18.06.2019: The announced subsidy cuts for electric cars in China will take effect next week, according to media reports. The central government will halve the existing subsidies electric cars with a range of more than 250 kilometers, while BEVs with less than 250 km range will not receive any financial support. It is expected that China’s carmakers will react by significantly increasing the prices of their electric cars starting next week.

news.metal.com, bloomberg.com, jjs.mof.gov.cn (statement by the Finance Ministry, in Chinese), nikkei.com (Update)