China has been making a major push to electrify its transportation sector, an effort that has largely relied on subsidies for EV producers and buyers. Plug-in sales in 2015 were over 330,000 units – a lot of cars by Western standards, but still short of Beijing’s goal of half a million.
In January, the Finance Ministry announced that it would phase out subsidies by 2021.
At a recent meeting of the State Council, Premier Li Keqiang announced that the government’s strategy would shift from supporting EV production to rewarding companies that produce new technologies and hit sales targets (via Financial Times, subscription required). Areas of particular focus include making breakthroughs in battery technologies and electrifying taxi and bus fleets in major cities.
The reliance on new energy vehicle subsidies has led to widespread inefficiency and even outright fraud, Chinese media outlets have reported. Companies are eager to take government money, but less keen on actually undertaking expensive R&D in EV technology.
“The age of subsidizing manufacturers is whittling away,” said Bill Russo, Managing Director at Gao Feng, a Shanghai-based advisory. The government has “decided to focus the development on areas where China can develop some degree of competitive leadership.”