What’s new: GAC Group (601238.SH) Chairman Zeng Qinghong proposed a one- to two-year extension of the Chinese government’s subsidies for new-energy vehicles (NEVs), which are scheduled to end at the end of this year.
The NEV industry still faces multiple difficulties; the overall scale of NEV production is still relatively small; and there is room for improvement of supporting infrastructure such as charging stations and battery swaps, Zeng said. The automaker executive, a delegate to the National People’s Congress, made the proposal before the annual national legislative session starting Friday.
An extension of subsidies and simplified procedures for receiving the funds would ease financial pressure on auto markets and release more positive policy signals, Zeng said in his proposal. He also suggested paying subsidies directly to consumers to boost sales of NEVs and supplementing them with other measures to ensure the sustainable development the market.
Xin Guobin, vice minister of the Ministry of Industry and Information Technology, said Monday at a press conference that the ministry will step up efforts to clarify support policies such as extending purchase tax exemptions for NEVs to stabilize market expectations.
The background: This will be the last year for government subsidies of NEVs. Since 2009, the Chinese government has handed out nearly 150 billion yuan ($23.7 billion) of subsidies for NEVs, creating the world’s largest market for electric vehicles. With Tesla, local producers and other global automakers all ramping up NEV production, a competitive ecosystem has grown up in China.
The government is cutting NEV subsidies 30% this year and phasing them out at year-end, according to a notice issued Dec. 31 by the Ministry of Finance and three other ministerial agencies.
Under the new regime, subsidies can reach as high as 12,600 yuan ($1,978.80) for each electric passenger car purchase, depending on how far it can travel on a single charge. The upper limit was 18,000 yuan in 2021 and 22,500 yuan in 2020.
Reduced subsidies together with chip shortages and raw material price increases have prompted many automakers to raise prices to test market acceptance.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
Get our weekly free Must-Read newsletter.
