China Ponders Another Cut in EV Subsidies

Bill Hampton

China’s central government reportedly is studying whether to further reduce subsidies on the purchase of electric vehicles.

If implemented, the cuts would take effect in 2020, sources tell Bloomberg News. They say a decision whether to proceed will depend upon EV sales rates over the next several months.

China has been heavily supporting its EV market since 2009, Bloomberg notes. The central government says it distributed 22 billion yuan ($3.2 billion) in EV subsidies to manufacturers in 2017. Some of the country’s largest cities added to the amount.

The program has made China the world’s largest market for hybrid and all-electric vehicles. The country currently accounts for about half of all such sales worldwide.

Central planners announced four years ago they would slowly phase out subsidies as a way for force consolidation within China’s EV industry. The original scheme was to reduce support by 20% in 2017-2018 and 40% in 2019-2020 before removing aid entirely in 2021.

But the most recent reduction in June—a 50% drop from earlier payouts to 25,000 yuan ($3,600)—triggered dramatic shrinkage in sales that has continued since then. Retail EV deliveries plummeted 45% in October, the China Passenger Car Assn. says.