China cuts NEV subsidies by half

Your next car may cost you more than you think. China has released a new plan to cut national subsidies on new energy vehicles (NEVs) by half, a move that experts say will help the market competitive. Although it is long anticipated, Chinese car makers still feel the impact.

"New energy vehicle enterprises are expected to face some pressure," said Lian Qingfeng, spokesperson of Beijing Electric Vehicle Co, adding, "But if an industry keeps relying on subsidies, it will never survive."

Over the past decade, the Chinese government has offered tens of billions of yuan to help foster the production of NEVs and stimulate the market. But some companies have become over-reliant, even counting on government aid to make profits. Professor Liu Chunsheng of the Central University of Finance and Economics believes that the policy change came just in time.

"The essence of subsidies was to help the infant industry grow, not for companies to leech onto government aid. I think ten years is enough," said the professor.

The subsidy for those with a driving range of 400 kilometers and beyond will be cut from 50,000 yuan (7,500 U.S. dollars) to half. The new policy also raised the subsidy thresholdrange to 250 kilometers.

It is believed that the new plan will make room for more capable companies, encouraging them to upgrade technology, cut down the costs and improve the overall quality.

"The cut is inevitable that all companies must face directly. How they can upgrade quality and technology to stay competitive are the keys and they must. After all, the market is always about thesurvival of the fittest," Liu added.

Local governments are also asked to cut subsidies on purchases of electric vehicles and spend them on charging infrastructure, after a three-month grace period.

Experts say the new policy may affect car prices in the future. But many firms promised not to raise prices for now; some even offer incentives on the models to compensate for the cuts.

Professor Liu believes in the long term; it is beneficial to consumers as the government is now shifting aid from cars to charging poles and hydrogen stations, thus, better services and facilities will eventually encourage more purchases.

China, the world's largest NEV market, sold over 1.2 million units last year, according to China's Passenger Car Association, and this number is expected to reach 1.7 million this year.

(CGTN)