SHANGHAI, May 18 (Reuters) – China is in talks with automakers over extending costly electric vehicle (EV) subsidies that were due to expire in 2022, in a bid to maintain growth in a key market as the economy in general is slowing down, three people familiar with the matter said.
The decision by policymakers comes as the world’s second-largest economy has slowed sharply – and auto sales with it – after cities led by Shanghai imposed strict COVID-19 shutdowns from March. The restrictions have closed stores, disrupted supply chains and reduced spending, including on new homes. Read more
Government departments, including the Ministry of Information and Industrial Technology (MIIT), plan to continue subsidies for electric vehicle buyers in 2023, said the people, who declined to be named because the discussions were private. .
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China’s costly incentive program has been credited with creating the largest electric vehicle market in the world. Since the subsidies began in 2009, some 100 billion yuan ($14.8 billion) has been distributed to buyers including commercial fleet operators through the end of 2021, according to an estimate by Shi Ji, an auto analyst at China Merchants Bank International.
Full terms for the 2023 extension, including the amount of subsidies and the vehicles that would be eligible for them, have not been finalized, those familiar with the matter said.
A measure specific to the study would reverse a planned purchase tax increase for qualified electric and partially electric vehicles, two people briefed on the discussions told Reuters.
For this year, there is no purchase tax for these vehicles, but the government had planned to raise the tax to 10% of the purchase price in 2023. Instead, the rate would be increased to only 5%, they said.
Subsidies have been available for cars made by all automakers, including non-Chinese players like electric vehicle giant Tesla O>, which has a factory in Shanghai and is the only foreign automaker with the most electric vehicle. sold.
MIIT and the Ministry of Finance did not immediately respond to requests for comment on Wednesday.
The electric vehicle subsidy program was originally scheduled to be phased out by the end of 2020, but Beijing extended it for two years to stimulate demand in the wake of the COVID pandemic.
The government also reduced the amount of subsidy per vehicle over the years as demand increased and manufacturing costs fell. For example, the subsidy for a plug-in hybrid with a range of more than 300 kilometers has been reduced by approximately 20% to the equivalent of approximately $1,900.
EVS FOR $4,000
The incentive program for the purchase of what China calls New Energy Vehicles (NEVs) has notably boosted purchases of longer-range cars, as it has raised the threshold for vehicles eligible for subsidies over the years. .
In China’s highly developed electric vehicle market, small battery-powered city cars, most of which are not eligible for subsidies, account for 40% of electric vehicle sales, according to automotive consultancy JATO, and cost on average a little less than $4000. That compares to over $26,000 in the US for equivalent models.
Subsidies now target larger models, with a range of more than 300 kilometers per charge and a price below 300,000 yuan ($44,459).
NEV sales in China rose 45% year-on-year in April to 299,000, according to data from the China Association of Automobile Manufacturers (CAAM), while across the auto sector some 1.18 million vehicles have been sold. But that jump was much slower than the previous month’s growth, when sales more than doubled from a year earlier.
The association predicted that production and demand would start to catch up in the coming weeks after the April low, triggered when dozens of cities in China were in full or partial COVID lockdown.
CAAM has urged the government to consider additional support for the industry. Overall vehicle sales in April were down nearly 48% from a year earlier, according to data from the industry group.
Some local governments, including Guangdong and Chongqing, also introduced stimulus measures to subsidize consumers who trade in their old combustion-engine vehicles for new electric vehicles in April.
In what would be a separate decision, the state-run China Securities Journal reported on Tuesday that authorities would introduce subsidies from June to encourage more rural buyers to buy cars, including NEVs, with payments that could reach 5,000 yuan ($740) per vehicle.
The Shanghai municipal government is also considering how it can revive spending after a drastic wipeout in vehicle sales in China’s commercial and financial hub in April. Not a single new car was sold in the city of 25 million during last month’s strict lockdown, according to the Shanghai Automobile Sales Trade Association.
($1 = 6.7478 Chinese yuan renminbi)
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Reporting by Zhang Yan and Norihiko Shirouzu; Editing by Kenneth Maxwell
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