China Extends New Energy Vehicle Subsidies Through 2022

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【Summary】The Chinese government announced that it will extend subsidies for New Energy Vehicles (NEVs) to 2022 to help auto sales rebound after the coronavirus pandemic. NEVs include fully-electric vehicles, plug-in hybrid and hydrogen fuel cell models.

Eric Walz    May 31, 2020 1:45 PM PT
China Extends New Energy Vehicle Subsidies Through 2022
A Geely Auto Group dealership in Southwest China.

The Chinese government announced that it will extend subsidies for new energy vehicles (NEVs) to 2022, according to documents from the country's Ministry of Finance, Ministry of Industry and Information Technology (MIIT), Ministry of Science and Technology and the National Development and Reform Commission.

NEVs include fully-electric vehicles, plug-in hybrid and hydrogen fuel cell models. China's State Council delivered the same guidance last month to extend the subsidies. 

The incentives to purchase zero and lower emissions vehicles was scheduled to end entirely this year, but the ongoing coronavirus pandemic has seriously impacted auto sales this year and the extension might help them to rebound. 

With the exception of vehicles equipped with swappable batteries, new energy passenger vehicles need to cost below RMB 300,000 (US$42,362) to qualify for the incentives, which disqualifies Tesla models, as well as imported electric models from BMW, Audi and Daimler.

The lowest priced China-made Model 3, which is now being built at Tesla's new factory in Shanghai, starts at RMB 303,550 (US$42,863) so it will no longer qualify for the NEV subsidy. 

As part of the plan to extend the incentives through 2022, the government will reduce subsidies in 10% increments each year, beginning this year. In 2021, the subsidies will be cut by 20%, then by 30% in 2022, according to the document jointly issued by the four Chinese Ministries. 

The subsidies won't be reduced this year for commercial NEVs, such as those used for public transport, taxis, ride-hailing service, sanitation vehicles, urban delivery and postal vehicles. However, they will be cut for these vehicles by 10% in 2021 and 20% in 2022. 

China has set an aggressive target for NEVs to be 20% of new car sales by 2025, as part of the government's plan to reduce air pollution in the world's biggest auto market. Currently, sales of NEVs account for 5% of all vehicles sold. Total vehicle sales in China reached 25 million units in 2019.

The generous subsidies led to a new crop of EV startups emerging in China crowding the market. Last year, there were over 450 NEV manufacturers registered in China. When China reduced the subsidies in March 2019, the goal was to "to promote the survival of the fittest," according to Xinhua, China's official state news agency. 

Among the most prominent of the new EV startups are NIO, Xpeng Motors and Byton. All three automakers are aiming to compete with Tesla in China.

The reduction in subsidies resulted in falling demand. China saw its NEV sales fall 4% year on year to 1.2 million units. For the first quarter of 2020, sales of NEVs plummeted by 56.4% as a result of the coronavirus outbreak, but it also fell for the rest of the industry.

China's automakers suffered their worst first quarter ever this year, as the coronavirus pandemic closed factories and dealerships for weeks and demand for new vehicles vanished as buyers were under government mandated lockdown. The first cases of the coronavirus were reported in Wuhan, which is home to many of China's auto manufacturing plants. 

Earlier this month, the government-backed China Association of Automobile Manufacturers announced total vehicle sales declined 42% to 3.7 million vehicles. Vehicle sales plunged 79% in February. 

Although demand slightly increased in March, sales for that month were still down 43% on year at 1.4 million vehicles. 

The revised subsidy policy is in effect as of April 23, with a three-month grace period ending July 22.

resource from: Gasgoo

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