China Reduces New Energy Vehicle Subsidies by Twenty-Percent
China’s Ministry of Finance Reduces New Energy Vehicle Subsidies by Twenty-Percent and Encourages More Industry Competitiveness
China’s new energy vehicle industry performed less than expected in 2016 due to false reporting of subsidized production and sales. Over the first eleven months of 2016, China produced 427,000 and sold 402,000 new energy vehicles, with an approximate year-on-year growth rate of 59.0% and 60.4%. China continues to be the world’s largest new energy vehicle market, but is far from reaching the sales target of 700,000 units set by the Ministry of Finance at the beginning of the year. Based on the historical sales trend, PIM predicts that the annual sale volumes will reach about 450,000 in 2016.
Fig. 1: China’s new energy vehicle sale volumes in 2016
(Sources from the Ministry of Industry and Information Technology, PIM analysis)
The new energy vehicle subsidy policy, after several revisions, was published by the Ministry of Finance on December 30th
. PIM reports that, compared to the past policy, the revision focuses on encouraging technical improvements and healthy industry development with reduced subsidies and increased technical thresholds. Subsidies in 2017-2018 will be 20% lower than in 2016 and from 2019 to2020 will be further reduced by 20%. Newly added technical indexes include battery energy densities, charging rates, fuel economy and power consumption per 100km per ton.
China’s new energy vehicles will finally transform from the policy-driven to market-driven in the future. Vehicle companies should put more attention on products and innovation to avoid excessive dependence on subsidies and false reporting.
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