BYD Qin EV300

BYD Qin EV300

Chinese automaker BYD says that it will increase output of plug-in electric vehicles in an effort to cut costs.

BYD plug-in hybrid vehicles Qin and Tang

BYD plug-in hybrid vehicles Qin and Tang

BYD's hope is that it can sell more plug-ins next year than it did in 2016, despite the fact that China will begin to reduce subsidies for these vehicles.

By increasing output, BYD hopes to  decreases costs by an amount close to half the reduction in subsidies (-20% in 2017, as compared to 2016).

China Daily reports:

"Considering the government's subsidy for new energy vehicles will decrease by 20 percent in 2017, the company has to cut its costs by 5 to 10 percent to compensate for this."

"According to the Ministry of Finance, China will reduce the 2017-18 subsidies for new energy vehicles by 20 percent from those granted in 2016, and further cut them by 40 percent in the 2019-20 period."

"All subsidies will be phased out after 2020..."

In addition, BYD will ramp up production at its battery cell division in an effort to further drive down costs. BYD says batteries account for up to 40% of the cost of electric vehicles.

BYD says that it's prepared for the phase-out of subsidies, but it seems most other Chinese automakers are not ready for this reality.

The past few years have been break-out years for plug-in electric vehicle sales in China (largely due to those subsidies), but the coming years will show us whether or not EVs can stand on their own as subsidies begin to phase out.

Source: China Daily