Generous subsidies have helped China to become by far the world’s largest EV market. However, the government has begun to phase out the incentives – EV subsidies are expected to be substantially reduced in 2019, and eliminated completely in 2020.

“Next year’s subsidies will likely be reduced by approximately 30% compared with this year,” a representative from the China Association of Automobile Manufacturers told Nikkei. The official People’s Daily confirmed the prediction, which was unwelcome news for some in the industry.

“If subsidies for popular models are steeply reduced, sales could soften,” an executive at a major Chinese automaker said.

Subsidies are linked to driving range, so certain models may end up with increased subsidies even as overall subsidies decline. Some suggest that the Chinese government wants to use the subsidies to guide vehicle sales by model. For example, this year, EVs with a range of 150 km receive a 15,000 yuan ($2,178) subsidy – down 60% from 2017. But incentives for models with a 400 km range got a 10% boost to 50,000 yuan.

If the central government cuts subsidies as expected, local governments, many of which also offer various incentives, are likely to follow suit.

Nikkei predicts that some 28 million new autos were sold in China in 2018. “New energy” vehicles are expected to account for 1.2 million units, up 50% from 2017.

Source: Nikkei Asian Review