By on February 20, 2020

It could be argued that a large portion of the Chinese economy has been propped up by government programs, with electric vehicles making one of the best examples. With a vested interest in battery technology, China did everything it could to encourage industry players to focus on EVs while subsidizing their purchase by consumers. The end result was a country with the highest number of alternative-energy vehicles in the world — and more automotive automotive startups than it knew what to do with.

While the plan was always to force accelerated competition by getting new manufacturing firms to duke it out for supremacy, EV sales were also supposed to remain sky high. Yet they didn’t. China’s auto market began running out of steam far earlier than everyone assumed. When the country nixed electric-vehicle subsidies over the summer, the segment went into a tailspin, with every successive month returning negative growth.

China would like to see things turn around, so it’s mulling the prospect of reintroducing incentives to get EVs into more driveways. 

According to Bloomberg, the plan had been under consideration long before the coronavirus outbreak threw the country into chaos.

The outbreak only strengthens the case to re-subsidize, as it’s also suppressing vehicle production and sales. It’s hardly surprising that few want to risk exposure so they can get out there and purchase or build a new automobile to support China’s ailing economy. However, once the bigger fish are fried, China would like to make new vehicle purchases as appetizing as possible.

From Bloomberg:

Talks are at a preliminary stage and there is no guarantee the subsidies will be extended, the people said. As things stand, they are still set to be phased out at the end of 2020.

Prolonging the handouts would be beneficial to local EV makers such as BYD Co., BAIC BluePark New Energy Technology Co. and NIO Inc. as well as the likes of Tesla Inc., which last month started deliveries from its new Shanghai factory, its first outside the U.S.

Sales of new energy vehicles including electric cars, plug-in hybrids and fuel-cell cars tumbled 54 percent in January from a year earlier and the wider auto market also shrank, according to China Association of Automobile Manufacturers. Those figures were largely before the coronavirus outbreak took hold and led to citywide lockdowns and production halts.

While there’s no confirmation from Chinese officials, the Ministry of Industry and Information Technology has already indicated it wants to reevaluate China’s existing policies. A number of rules surround EVs, some of which added to customer confusion as several municipalities issued certain regulatory mandates a year early when incentives were first being stomped out. Automakers operating within the country are also required to manufacture electric models specifically intended for the Chinese market. With fewer people buying them, that’s also looking like a loser.

The PRC will undoubtedly have to do something, and reconfiguring all regulations relating to zero-emission vehicles sounds rather involved. Offering customers some cash back on EVs while the industry attempts to normalize them seems a lot easier.

[Image: Xujun/Shutterstock]

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6 Comments on “Report: Chinese EV Subsidies May Be Coming Back...”

  • avatar
    SCE to AUX

    Interesting story, but anything with China and “market” in it is automatically distorted by their government policies, and doubly when we’re talking EVs. Oh wait, that’s the same everywhere.

    • 0 avatar

      But, “this is a car site, we should stay out of politics”! As if politics stayed out of cars.

      Reports are that China just plans to take the mandate approach. Interesting to think that California actually beat China to the punch in an area of central economic planning.

    • 0 avatar

      Speaking of distortion and mandates, I know I’ve mentioned this before, but it bears repeating. In China, you have to get a license plate before you can go down to the dealership to buy a car. In several major cities, like Beijing and Shanghai, you can get a green plate (for an EV) today, and go buy your ride. But a blue plate (gas/diesel) can take, literally, years of waiting. So depending on where you live, if you want to drive today (or this year), you’re buying electric.

      EVs probably make more sense. As far as I can tell, people in China do not drive across the country the way people do in the US. They have a much more advanced rail system that makes long distance travel easier.

  • avatar

    has anyone figured out where all the raw materials for these ultimately consumable batteries will come from?

    seems there’s an assumption that prices will fall but what happens to BEVs if battery prices go up due to supply and demand?

    • 0 avatar

      @thormark: That’s a good question. It’s being addressed in several ways. Manufacturers are trying to reduce the amounts of raw materials like cobalt needed to produce batteries. New mines are being opened as well. There is also a lot of research into making batteries from more common materials.

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