China cuts EV subsidies—Tesla Model 3 exceeds price limit

China has announced a cut to its subsidies on new energy vehicles (NEVs), effective immediately. It’s been something of a rollercoaster ride for the subsidies of late. In 2015, the government announced plans to end the subsidies this year. In January, it said there would be “no significant cuts” this year. In March it confirmed they would be extended, but warned of a possible reduction.

Under the new plan, purchase subsidies for NEVs, which include PHEVs and fuel cell vehicles, will drop 10% this year, 20% in 2021, and 30% in 2022. Tax exemptions on purchases will be extended for two years. Subsidies on commercial NEVs for public purposes will not be reduced this year.

The details of the plan appear to have created some winners and losers. The authorities plan to support the sale of cars with swappable batteries, a technology that Chinese EV-makers Nio and BAIC BluePark have pursued.

The government has tightened requirements for the driving range, power efficiency and sales prices of cars that qualify for the subsidies. Only passenger cars costing less than 300,000 yuan ($42,376) will be eligible. That excludes some higher-priced EVs sold by BMW and Daimler. It also edges out Tesla’s China-made Model 3, which is currently priced at 323,800 yuan before subsidies. Will Tesla reduce the price in order to let buyers benefit from the subsidies?

Sales of NEVs contracted for the 9th month in a row in March, and were down over 50% from a year earlier, according to the China Association of Automobile Manufacturers.

Source: Reuters
Image: mariordo59  (CC BY-SA 2.0)

  • Stuart McColl

    The timing coincidence of some of these things coming from the Communist regime are remarkable. Trade deal signed … here comes Corona Virus. Virology lab in Wuhan, a few miles from lab virus first reported. Model 3 comes out … reduce the subsidy which favors Chinese car company NIO. I’m not too much of a conspiracy guy … I’m an accounting expert ( in the auto industry ) … it’s just difficult to ignore some of this timing and numbers coming out of issues that directly impact the Communist as random. The common denominator here is indeed “Communism”.

    • Lance Pickup

      You could probably say the same thing about any regime, regardless of where it lies on the political spectrum.

      The thing about Tesla’s standing in China, though, is that China appears to otherwise love Tesla. They certainly have gone out of their way to fast track the Gigafactory construction and even allowing Tesla in without requiring a government controlled partner is a bit unprecedented. It is surprising, therefore, to see the subsidies rule out Tesla Model 3s. I suspect the price raise may be a card that Tesla is playing to get the subsidies back in line with benefiting Tesla. Or maybe Tesla just doesn’t care to play the “chase the subsidy” game. They may have sufficient demand for the aspirational car even without the subsidies.

  • Glenn Marks

    I think Tesla has room to move with the price once all its parts are sourced locally and could be a carrot to get them to reduce the price of the model 3 making the car more affordable to all.