China to Phase Out Subsidies for New-Energy Vehicles in Effort to Prevent Overcapacity

China to Phase Out Subsidies for New-Energy Vehicles in Effort to Prevent Overcapacity

Liao Shumin

Date: Tue, 09/12/2017 - 16:18 / source:Yicai
China to Phase Out Subsidies for New-Energy Vehicles in Effort to Prevent Overcapacity
China to Phase Out Subsidies for New-Energy Vehicles in Effort to Prevent Overcapacity

(Yicai Global) Sept. 12 -- China’s Finance Ministry is to work with relevant departments to accelerate the introduction of a new points-based system for new energy vehicles (NEVs) that will replace the current long-standing subsidies provided by the government, said Xinhua quoting Song Qiuling, deputy head of the Finance Ministry's economic construction department.

The government aims to eliminate the old subsidy system in order to reduce the risk of overcapacity in the sector. The rapid development of China's NEV industry is intimately linked fiscal and tax support.

"A set of supporting policies including purchasing subsidies, operation subsidies, R&D awards, incentives for the construction of charging facilities, technical standards and regulatory platforms have been developed," said Song.

China has also used policy tools such as taxation to promote the development of the NEV market. NEVs are exempt from vehicle & shipment and purchase taxes. Price subsidies for public buses have also been adjusted, while efforts have also been made to help balance the costs of petrol vehicles and NEVs.

The original goal of consumption subsidies was to help cultivate the market. However, the long-term offering of such subsidies will not only place a heavy burden on the government but also make companies dependent on them, prompting them to expand blindly, which could lead to overcapacity, he added.

The Finance Ministry will strengthen supervision going forward and support the relevant departments to establish NEV regulatory platforms as quickly as possible in order to monitor the entire process from materials, procurement, vehicle production, sales, and operation to applications for funds and the review of applications.

Authorities will also encourage the use of incentive funds to speed up the construction of charging facilities, and will look to reward innovative approaches such as crowdfunding through public-private partnerships (PPP) to lower construction costs and the achievement of risk- and benefit-sharing, Song said.

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Keywords: New Energy Vehicles, Fiscal Subsidy, The Ministry of Finance, Financial and Taxation Policy