SHANGHAI — China is in talks with automakers about extending costly subsidies for electric vehicles that were set to expire in 2022, aiming to keep a key market growing as the broader economy slows, three people familiar with the matter said.
The move by policymakers comes as the world's second-biggest economy has slowed sharply — and auto sales along with it — after cities led by Shanghai imposed tight COVID-19 lockdowns starting in March. The curbs have shut stores, disrupted supply chains and slashed consumer and business spending, including on new homes.
Government departments including the Ministry of Information and Industrial Technology are considering a continuation of subsidies for EV buyers in 2023, said the people, who declined to be named as the discussions are private.
China's expensive incentive program has been credited with creating the world's largest EV market. Since the subsidies began in 2009, some 100 billion yuan ($14.8 billion) has been handed out to buyers including commercial fleet operators, through the end of 2021, according to an estimate by Shi Ji, an auto analyst with China Merchants Bank International.
The full terms of the 2023 extension, including the amount of subsidies and which vehicles would qualify, have not been finalized, the people with knowledge of the matter said.
One specific measure under review would roll back a planned sales tax increase for qualified electric and partly electric vehicles, two people briefed on the discussions told Reuters.
For 2022, there is no sales tax on such vehicles, but the government had planned to raise the tax to 10 percent of the purchase price in 2023. Instead, the rate would be raised to just 5 percent, they said.
Subsidies have been available for EVs made by all automakers including non-Chinese companies such as EV giant Tesla Inc., which has a factory in Shanghai and is the only foreign automaker with a top-selling EV.
The MIIT and Ministry of Finance didn't immediately respond to requests for comment on Wednesday.
The EV subsidy program was originally scheduled to be phased out by the end of 2020, but Beijing extended it for two years to spur demand in the wake of the COVID pandemic.
The government also cut the amount of subsidies per vehicle over the years as demand surged and manufacturing costs fell. For example, the subsidy for a plug-in hybrid with a range of more than 300 kilometers was cut by about 20 percent to the equivalent of about $1,900.