China to Gradually Remove Local Subsidies for New Energy Vehicles to Promote Healthy Market Competition
Tang Shihua
/SOURCE : Yicai
China to Gradually Remove Local Subsidies for New Energy Vehicles to Promote Healthy Market Competition

(Yicai Global) Dec. 19 -- China will tighten its subsidy policies for new energy vehicles (NEV) next year. The central government is studying how to adjust the subsidy policies in 2018 and plans to subsidize only those high-mileage and low-energy vehicles. It also considers removing local subsidies, reported, quoting Lu Huaping, assistant secretary-general of the China Passenger Car Association.

Beijing may be the first to withdraw local subsidies next year, Caixin quoted insiders as saying. However, Niu Jinming, director of Beijing new energy vehicle development and promotion center, said he was not aware of any such development.

Removing local subsidies will help weaken local protectionist policies and promote a healthy competition in the new energy vehicles market although it is likely to bring cost pressures on NEV companies, insiders pointed out.

There will be a gradual reduction of subsidies for new energy vehicles in 2018, reported the Economic Observer. The subsidies for vehicles with a maximum of 150km endurance mileage will be eliminated.

"The iron phosphate-lithium power battery technology roadmap is difficult to achieve high energy density requirements, which means that the entire battery industry will likely focus on their transition to the ternary material battery technology," Caixin quoted the head of a domestic power battery supplier as saying.

The subsidies for new energy vehicles in China are provided under two categories: central government subsidies and local government subsidies. The latter has stimulated rapid development of domestic new energy vehicle industry, but has also led to fraudulent declarations on the part of the enterprises that don't meet the requirements. Moreover, some local enterprises which the local governments prioritize for subsidies attempt to prevent other brands from entering the local market. However, under new policies from next year, gradual decrease in subsidies will bring in healthier competition to the market.

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Keywords: New Energy Vehicle , Government Subsidy , Local Government