(Yicai Global) Jan. 4 -- New energy vehicle makers are either raising prices like Tesla or absorbing some of the higher cost like Nio and Xpeng Motors as China moves toward scrapping state aid for electric and hybrid cars by the end of this year.

China will cut NEV purchase subsidies by 30 percent from the start of 2022 and completely remove them by the end of the year, the finance ministry and other authorities said in a joint statement on Dec. 31. The sector no longer needs state support because sales are robust, it said.

NEV sales are expected to have increased 1.5 times last year to 3.4 million and may jump 47 percent this year to 5 million, the China Association of Automobile Manufacturers predicted on Dec. 17.

To deal with the change, Tesla has raised the prices of its Model 3 and Model Y by CNY10,000 (USD1,570) and CNY21,000, respectively, while FAW-Volkswagen Automobile, a joint venture of Germany’s Volkswagen and China’s FAW Group, hiked those of its ID.6 Crozz and ID.4 Crozz by CNY5,400. GAC Aion New Energy Vehicle, Hozon Auto, and Feifan Auto also raised prices from Jan. 1.

Nio will absorb the difference between the old and new subsidies for buyers who put down deposits before midnight on Dec. 31 and take delivery before March 31. Xpeng will do the same for customers who make down payments between Jan. 1 and 10.

A pure electric vehicle with 400 kilometer-plus mileage and a sales sticker under CNY300,000 (USD47,100) can enjoy a CNY18,000 (USD2,800) subsidy this year, CNY5,400 less than in 2020. Support for electric taxis and urban buses will be cut 20 percent from last year.

China had planned to abolish the subsidies by the end of 2020, but delayed the move in light of the pandemic. In April that year, the finance ministry announced that from 2020 to this year state support would be cut by 10 percent, 20 percent and 30 percent, respectively.

The policy for this year has not been altered, giving an overall stability that exceeds expectations, said Cui Dongshu, secretary-general of the China Passenger Car Association. It can help boost sales of lower-end EV models, he said. Cui also predicted that overall NEV sales will exceed 6 million this year, with a penetration rate of about 22 percent.

Editor: Futura Costaglione