Report: China Considers Extension Of EV Subsidies Beyond 2022

The current support is set to expire at the end of the year, which causes doubts about the EV market as the economy slows.

BYD Han

Mark Kane

By: Mark Kane

May 18, 2022 at 8:25am ET

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China is the world's largest and also one of the fastest-growing plug-in electric car markets, which in substantial part was possible through subsidies and tax breaks.

Over recent years, the Chinese government was gradually reducing EV support, but according to Reuters, it might be forced (again) to extend the subsidies, to keep the market growing, as the broader economy slows. Reuters' unofficial sources say that the government is in talks with automakers about the topic of maybe extending the subsidies beyond 2022.

It's estimated that between 2009, when the subsidies began, through to the end of 2021, China spent 100 billion yuan ($14.8 billion) on EV subsidies.

"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 up to end-2021, according to an estimate by Shi Ji, an auto analyst with China Merchants Bank International."

At the beginning of 2022, the subsidies for all-electric cars was reduced by 30% from 15,840 CNY to 11,088 CNY ($1,645), and were set to expire at the end of 2022 (two years behind the original schedule).

Before that, the threshold of maximum price (300,000 CNY) and minimum range (300 km/186 miles) was applied, which limited the eligibility for subsidies.

Another thing is the exception of purchase tax (since 2014), which was planned to expire as well, but in the end, it might remain at 0%, or go up to 5%, instead of the planned 10% in 2023.

The China Passenger Car Association (CPCA) forecasts that some 5.5 million plug-in electric cars might be sold in 2022 (6 million including commercial vehicles).

During Q1 2022, plug-in car sales exceeded 1.1 million (up 130% year-over-year), which is over one-fifth of the total car market.

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It appears to be very likely that China will try to do something if there is any risk that this very important segment (from a technological and export potential point of view) will show any signs of weakness.

We are eager to see the Ministry of Information and Industrial Technology (MIIT)'s decision.