Decrease of New Energy Vehicle sales in China made the government cautious about further EV subsidy cuts.

The Chinese government announced that there will be no significant cut in New Energy Vehicle incentives in 2020, after the previous round of the phase-out caused the market to shrink in the second half of 2019.

Plug-in electric car sales have been falling every month (year-over-year) since July, when subsidies were cut in half (24,750 yuan / roughly $3,500+) and limited only to vehicles with an NEDC range of at least 250 km (155 miles).

Because of that, NEV sales - instead of maybe reaching 2 million - went down from 1.3 million in 2018 to 1.2 million in 2019.

The government and the automotive industry clearly does not want to deepen the decline and promised not to cut the subsidies in July 2020 again. Maybe there will be some cuts in 2020, but "no significant" ones.

"Earlier, Miao Wei, China’s minister for industry and information technology (MIIT), told a forum that the country would not cut subsidies for new energy vehicles (NEV) again in July, an approach which was cheered by vehicle makers.

The government-backed Beijing News said an MIIT representative, in response to Miao’s statement, said that “this year’s NEV subsidy policy will remain relatively stable and there will not be significant cuts”."

It's not clear yet whether the previous plan to complete the phase-out in 2021 is still valid or will be simply delayed to "stabilize market expectations".

The government might not have a choice as the weak sales results by many EV companies in China were a very worrying sign, especially for young startups.

Source: Reuters, Bloomberg