Chinese authorities announce 2019 subsidy scheme for NEVs
[Excerpt of a AutoIntelligence Daily article]
Chinese government authorities yesterday (26 March) announced the final version of the revised subsidy policies for new energy vehicle (NEVs). The highly anticipated 2019 subsidy scheme, which was originally due to be announced in February, is largely in line with market expectations that financial aid will continue to dwindle through to 2020. The new subsidy scheme almost halves the subsidies provided by central government in 2018 and further raises the threshold for a vehicle to be eligible for the subsidies. The new scheme also confirms previous media reports indicating a move to cancel local-level passenger electric vehicle (EV) subsidies; instead, local governments will now be required to support infrastructure building to add more charging stations and hydrogen refuelling stations, as well as providing better services. Local-level subsidies, however, can still be issued for electric buses and fuel-cell vehicles (FCVs). Passenger EVs with a driving range below 250 kilometres (km) are no longer eligible for any subsidy. The new scheme also factors in key technical parameters, such as energy density and energy consumption performance. NEVs with a battery energy density of 160 Watt-hours per kilogram (Wh/kg) or above can take advantage of the highest subsidies under the new scheme. According to China's Ministry of Industry and Information Technology (MIIT), the tougher NEV subsidy policy is aimed at boosting the competitiveness of NEV products and driving the industry to high-quality development.
The authorities will also monitor the reliability of NEVs. NEVs with significant quality issues will not be able to obtain government approval to go on sale and will no longer be eligible for subsidies. As with previous policies, a three-month transition period has been granted, starting from 26 March. The announced policies only apply to passenger and commercial EVs. Subsidy policies for FCVs and new energy buses will be announced at a later date.
Outlook and implications
China has heavily subsidised the NEV industry in the past decade to foster consumption. Such policies have worked effectively to attract manufacturers to the sector at an early stage and have encouraged consumer adoption of NEVs by lowering their purchasing prices. However, the shortcomings of this policy are also obvious. Manufacturers, which have grown reliant on government aid, have become less proactive on technology development.
The 2019 subsidy policy has been announced significantly later than in previous years. The delay has, to some degree, confused consumers as automakers have been rolling out various marketing policies to convince them to take advantage of the 2018 scheme. However, the more cautious attitude of industry authorities also reflects the critical role such policies have played in promoting the growth of the NEV industry. The significant reduction in government subsidies should not come as a surprise to manufacturers as the authorities have spoken openly on various occasions about their intention to promote "organic growth" of the industry and to phase out such subsidies by 2022. With less financial aid from the government, manufacturers will have to look at their product strategies more carefully and avoid engaging in technology competitions that come at a high cost. Foreign OEMs that have a deep technology reserve for EV development and a stronger brand, are likely to weather the policy changes better than smaller local players.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.