In March, China finally released details of its long-awaited subsidy policy for NEVs (new energy vehicles, a term which includes both fully-electric and hybrid vehicles). According to a joint statement by the Ministry of Finance and other authorities, the new policy aims to raise the standards of subsidy-eligible vehicles and encourage the production of vehicles with a longer driving range.
To be eligible, NEVs must now have a driving range of at least 250km, compared with 150km in 2018. National subsidies have declined by more than 50%, whereas local subsidies will be eliminated completely after a three-month transition period which ends on 25 June.
Subsidies for BEVs (battery electric vehicles) with a driving range of 400km and above will be halved from RMB 50k (US$ 7.4k) to RMB 25k (US$ 3.7k). Subsidies for BEVs with a driving range between 250km to 400km will be reduced to RMB 18k (US$2.7k).
Over the past 10 years, the Chinese NEV industry has been heavily subsidised by the county’s government, which has provided manufacturing incentives to NEV producers and subsidies to consumers. The new policies have switched the focus from simply encouraging higher energy densities to encouraging improved cycle life, safety, and performance. They could also move the industry away from one driven by policy to one which sees market-driven improvements. Subsidy reductions will be followed and by the complete abolition of subsidies by 2020 which will create further pressure within the NEV industry and, it is hoped, will boost competitiveness and encourage technological development. In the long-term, this is likely to result in the elimination of producers with inferior products.
According to the China Association of Automobile Manufacturers, there were 1.3M NEVs sold nationwide in 2018, including 984k BEVs and 271k PHEVs (plug-in hybrid vehicles). A pull-forward was seen in China ahead of the subsidy changes through Q1 but the true effect will only be seen in Q2 sales figures, with China’s NEV credit system expected to put pressure on OEMs to cover the subsidy cut (at least in part) or face fines that may exceed them, thus maintaining market growth. Roskill, therefore, does not expect any large price increase to Chinese NEVs anytime soon. Automakers are still determined to make and sell NEVs in order to seize more market share, even if this means paying the price of a loss in profit.
In the wake of the subsidy changes, it is expected that more government funds will become available to build charging infrastructures and hydrogen refuelling facilities.