Automotiv Exports July 2022

China in talks with automakers on EV subsidy extension
China is in talks with automakers about
extending costly subsidies for electric
vehicles (EV) that were set to expire in
2022, aiming to keep a key market growing
as the broader economy slows, three
people familiar with the matter said.
The move by policymakers comes as the
world’s second-biggest economy has
slowed sharply – and auto sales along with
it – after cities led by Shanghai imposed
tight COVID-19 lockdowns from March. The
curbs have shut stores, disrupted supply
chains and slashed spending, including on
new homes.
Government departments including the
Ministry of Information and Industrial
Technology (MIIT) are considering a
continuation of subsidies to EV buyers in
2023, said the people, who declined to be
named as the discussions were private.
China’s expensive incentive program has
been credited with producing the world’s
largest EV market. Since the subsidies
began in 2009, some 100 billion yuan
($14.8 billion) have been handed out
to buyers including commercial fleet
operators up to the end-2021, according to
an estimate by Shi Ji, an auto analyst with
China Merchants Bank International.
The full terms of the 2023 extension,
including the amount of the subsidies and
which vehicles would qualify for them,
have not been finalized, the people with
knowledge of the matter said.
One specific measure under review would
roll back a planned purchase tax increase
for qualified electric and partly electric
vehicles, two people briefed on the
discussions told Reuters.
For this year, there is no purchase tax for
such vehicles, but the government had
planned to raise the tax to 10% of the
purchase price in 2023. Instead, the rate
would be raised to just 5%, they said.
Subsidies have been available for cars
made by all automakers including non-
Chinese players like EV giant Tesla O, which
has a factory in Shanghai and is the only
foreign automaker with a top-selling EV.
The MIIT and Ministry of Finance didn’t
immediately respond to requests for
comment.
The EV subsidy scheme was originally
scheduled to be phased out by the end of
2020, but Beijing extended it for two years
to spur demand in the wake of the COVID
pandemic.
The government also cut the number of
subsidies per vehicle over the years as
demand surged and manufacturing costs
fell. For example, the subsidy for a plugin
hybrid with a range of more than 300
kilometers (186 miles) was cut by about
20% to the equivalent of about $1,900.
EVs for $4,000
The program of incentives for buying what
China calls new-energy vehicles (NEV) has
stoked purchases of cars with a longer
driving range in particular, as it has raised
the threshold on vehicles qualifying for the
subsidies over the years.
In the highly developed China EV market,
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