Like it or not, the future of electric mobility in America is very much up for grabs in this year's U.S. presidential election. Some automakers, charging providers and battery companies say they'll continue their march even if tax incentives and subsidies dry up. But there's no getting around the fact that such an outcome would slow America's progress in the electric race—and lose even more ground to China. Don't believe me? China, which originally heavily subsidized its EV industry, is turning up the heat again.
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China's aggressive EV subsidies
Government subsidies alone aren't why China's EV sector is so far ahead—much of that was also due to intense internal competition as well—but it definitely accelerated the country's investments in battery technology. Now the U.S., Europe and other Asian automakers are playing catch-up.
As noted by China-focused news site CnEVPost and CNBC, China's Development and Reform Commission and Ministry of Finance has announced new support for buyers of so-called "new energy vehicles," the country's term for battery EVs and plug-in hybrids. The new rules say that consumers "can enjoy double the amount of subsidies when replacing old vehicles with new ones, compared to what was previously announced," CnEVPost reported.
Call it China's electric Cash for Clunkers. If a consumer scraps a fossil-fuel-powered vehicle registered on or before April 30, 2018, and buys a new energy vehicle (NEV) instead, they qualify for a subsidy of 20,000 yuan ($2,770) per vehicle. If the trade-in vehicle has an engine with a displacement of 2.0 liters or less, the subsidy declines a bit to 15,000 yuan ($2,075.) The rule is in effect until the end of this year.
The new subsidy comes after China discontinued its nationwide direct subsidy for NEVs in 2022. But in the wake of softer-than-expected demand, China introduced a new, smaller NEV subsidy in mid 2023. The country began exempting NEVs from up to 30,000 yuan ($4,138) of sales tax. Combined with the credit for turning in a pre-2018 fossil-fuel vehicle, the tax emption could get a Chinese customer up to $6,908. That's less than U.S. buyers can get, but a big discount for buyers in a country that once tried to discontinue subsidies.
Granted, it's not all sunshine and roses in China's EV market—or its consumer sector as a whole, which is part of why the increase in subsidies is happening. China's economy has slowed down in recent months after more than a decade of explosive growth, and it's also been hammered by an ongoing real estate crash.
Though its electric vehicle sector is vastly more advanced than what we experience here in the U.S.—something we saw for ourselves at this year's Beijing Auto Show—sales have been progressively slowing since the COVID-19 pandemic. The impact has certainly been worse for Western and other Asian automakers, who once bet their futures on the world's biggest car market, only to see themselves displaced by the rise in intense competition from Chinese automakers.
So this new policy is aimed at driving consumption, and similar incentives apply to everything from farm equipment to apartment elevators, CNBC reported. Home renovations, appliances and more qualify for other subsidies.
But even if these subsidies are driven by a knee-jerk response to an economic slowdown, they still show the firepower China is willing to commit to its electrified vehicle transition. In May, vehicles with plugs made up a record 47% market share in China, all while the company's electric vehicle sector is rapidly expanding into the rest of the world.
China's not backing down in the electric vehicle race, and its consumers are benefitting from that right now. How America responds could very well define what our own automotive landscape looks like in the years to come.
Contact the author: patrick.george@insideevs.com
