(Yicai Global) March 27 -- China has cut more subsidies than expected for the new energy vehicle sector with pure electric cars unable to go for more than 250 kilometers on a single charge no longer eligible for the incentives.
The government has reduced subsidies in the sector by around half on average compared with last year, the finance ministry confirmed in a policy document, adding that all such incentives will end in 2020.
Although the new rules took effect yesterday, there is a transition period running to June 25 for vehicles that enjoyed subsidies last year but are longer able to do so due to the new policy. They will receive proportional payouts based on policies and regulations.
China should steadily raise the threshold required for energy capacity in NEV batteries, the document states, adding that the mileage range requirements for PEVs should also increase.
For example, NEVs with a minimum autonomy of 150km are eligible for subsidies based on last year's rules but this has now been raised to 250km. The subsidy for PEVs able to run continuously for over 400km has been halved to CNY25,000 (USD3,700) from CNY50,000 last year.
The document requires local governments to stop subsidizing NEV purchases, except for electric buses and fuel-cell vehicles, after the transition period. It also calls for the redirection of funding toward related infrastructure such as charging facilities and hydrogen refueling stations, as well as the improvement of other supporting services.
"Lowering the subsidies significantly is quite reasonable," said Cui Dongshu, secretary-general of the China Passenger Car Association, adding that it will not affect NEV sales which continue to rise. "The sector should still be able to maintain rapid development while accelerating its market-oriented transformation," he added.
NEV makers previously focused on subsidy policies when forming product portfolios, said Zeng Zhiling, general manager at the Shanghai unit of consultancy LMC Automotive. As a result, domestic brands concentrate on the low-end market since they only care about short-term interest when developing products, while most models launched barely meet minimum subsidy standards, he said, adding that many products with a low range will be eliminated thanks to the changes.
The central government began to promote subsidies for NEVs in 2009 to foster industrial development. The country's production of such cars grew 59.9 percent to 1.27 million last year, while sales rose 61.7 percent to 1.25 million.
Editor: William Clegg