SHANGHAI -- China’s ministry of finance in September reaffirmed the agency’s schedule to phase out subsidies for electrified vehicles at the end of 2020.
But remarks by a top official at the nation’s leading auto regulator this month imply the government now is bowing to industry pressure and market realities and leaning toward pushing the deadline back.
The reality is that without government subsidies, demand for electrified vehicles cannot be sustained.
Triggered by a cut in government incentives in June, demand for electric vehicles and plug-in hybrids has steadily dropped.
EV subsidies were scaled back more than 60 percent, and incentives for plug-in hybrids were cut in half.
As a result, annual sales of new electrified vehicles in China shrank for the first time in 2019, with total volume dropping 4 percent to around 1.2 million.
Today, full-electric light vehicles qualify for subsidies of up to 25,000 yuan ($3,608) while plug-in hybrid cars and light trucks are eligible for a flat subsidy of 10,000 yuan.
Addressing fears of more subsidy cuts for electrified vehicles, Miao Wei, minister of Industry and Information Technology, pledged on Jan. 11 that there would be “no further winding down” in the incentive program this year when speaking at an industry forum in Beijing.
When it comes to subsidies for electrified vehicles, Miao and the ministry of industry must also consider the ministry of finance’s priorities and modified a pledge at a press conference last week in Beijing.
Miao, when asked whether subsidies will be slashed again in June and terminated at year end, said the issue “is still under discussion” but added reductions going forward “will probably be more gradual” than the original plan.
The minister is suggesting the government likely will readjust the time frame for phasing out subsidies for electrified vehicles, with much of the current incentives to be kept this year and the rest extended beyond the end of the year.
If enacted, the move will bring some comfort to major Chinese EV makers such as BYD Co. and BAIC Motor Co. and global players such as Volkswagen Group that have invested heavily to build EV products locally.
