China Ends Electric Vehicle Subsidies as Sales Cut in Half

News Analysis

China is ending all electric vehicle subsidies for its 486 registered manufacturers after production fell by over a third and sales plunged by almost half.

The Ministry of Industry and Information Technology issued a draft of a 15-year EV plan on Dec. 3 that would mandate electric vehicles to account for 25 percent of Chinas annual domestic light-vehicle sales by 2025, despite ending its $7,000 “new energy vehicle” (NEV) subsidy this month that was cut in half in June.

Chinas October vehicle production fell by 1.7 percent compared to last year, and sales declined by 4 percent. But the biggest declines were centered in NEVs that saw production fall by 35.4 percent and sales tank by 45.6 percent, according to the China Association of Automobile Manufacturers.

China spent $36.5 billion on NEV subsidies from 2009 to 2017. By controlling between 50 to 77 percent of the global supply of anode, cathode, separator, and electrolyte for battery components, China broke the 500,000 annual sales mark in 2016 by making and selling over three times more NEVs than the United States.

Chinese leader Xi Jinping declared at the Nineteenth Communist Party Congress in October 2017 that he would expand the state-sponsored effort by requiring automakers to be scored on average fuel consumption. To foster the key technology, manufacturers with over 10 percent of production of NEVs could sell credits to other manufacturers for cash.

In order to move up the value-added chain to sell larger and more expensive NEV models, like Tesla, the Chinese regime offered 4.4 credits to any locally-built electric car that could run for more than 186 miles (300 km) per charge. Top domestic brands like Volkswagen and General Motors that each produce about 4 million vehicles a year would have to sell at least 100,000 NEVs a year to avoid stiff penalties.

Chinas top billionaires poured $18 billion into NEV start-ups. Alibaba founder Jack Ma led a $313 million funding of Guangzhou Xiaopeng Motors Technology, and Tencent Holdings founder Pony Ma organized a $1 billion investment round for NIO Inc. Shanghai property developer Evergrande announced a $3.8 billion funding of their Hengchi start-up with a goal of surpassing Tesla within three years.

American billionaire Elon Musk announced he would build Gigafactory 3 in Shanghai to build 500,000 Teslas a year, and Volkswagen stated it would pump $12 billion into China electric vehicle production.

But President Trump imposed 30 to 50 percent U.S. tariffs on Chinese solar panels and washing machines in January 2018. He followed up in March with additional tariffs of 25 percent on steel, and 10 percent on aluminum. As the Sino-U.S. trade war has ratcheted up tariffs and retaliatory tariffs, China car sales have slumped for eighteen months.

Despite deep pockets and a goal of establishing itself as the worlds top seller of NEV units, NIO Read More – Source