Adjustments and improvements to Subsidy Policies for New Energy Vehicles

At the end of March 2020, the Chinese State Council decided to extend until 2022 the subsidies for new energy vehicles (NEVs) including electric vehicles, plug-in hybrids and fuel cell vehicles, in order to alleviate the impact of Covid-19 on car sales and fuel. The subsidies, which were introduced in 2009, were due to be curtailed in 2020. 

 

The government set a target for NEVs to account for a fifth of auto sales by 2025, compared to the current 5 percent. Extending the subsidies aims to buffer the impact of the pandemic, boost car sales and increase the sector's competitive edge. Under the new plan, China is extending subsidies for another two years, cutting them by 10 percent, 20 percent and 30 percent year-on-year until their expiry in 2023.

 

The subsidies will apply only to passenger cars costing less than RMB 300,000 (USD 42,376) before subsidies. Tesla's China-made Model 3 sedan, which is currently priced over the benchmark, has the capacity to be reduced for subsidies. 

 

China is also setting a cap of around 2 million on the number of vehicles eligible for subsidies, which will be applied on a first-come-first-serve basis. This accounts for some 8 percent of car sales. In addition, when authorities buy vehicles for government use, they will prioritize new energy vehicles. 

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