China considering adjusting subsidies for new energy cars

A visitor looks at BYD E6 electric car on display at the New Energy Auto Expo in Nanjing, Jiangsu province, on March 22, 2014. Photo: Reuters

China is planning to further reduce the cumbrous subsidies for new energy cars, as Beijing is mulling a ban on the production and sales of gasoline cars as part of efforts to combat the notorious pollution problems and fulfill its commitment to peak its carbon dioxide emissions by 2030.

Recently, the country's regulator held a meeting with several automakers to discuss its plans to scale back its subsidies for electric and plug-in hybrid vehicles in 2018, according to a report by Caixin, a leading business news website.

The discussion is reversal of a previously released version of the policy, which stipulated that those subsidies would remain unchanged in 2018 and would be reduced by 20 percent in 2019-2020.

According to media reports, China was planning to completely cancel the current subsidies for new energy cars by 2020, when the policies on the restricted purchase of traditional energy cars, tax differentiation and free charging would be possibly introduced.

In September, Chinese vice minister of industry and information technology, Xin Guobin, announced the government's plans to make a timetable for an all-out ban on the production and sales of vehicles powered by fossil fuels, a policy designed to partly deliver on the government's promise to increase the share of non-fossil fuels as part of its primary energy consumption to about 20 percent by 2030 and peak greenhouse gas emissions by the same year.

Industry insiders said that by cutting the subsidies faster than expected the government is intended to prompt automobile manufacturers to reduce their currently high prices for new energy cars rather than depending on the subsidies to earn money.

In addition to the possible subsidies reduction, the government would also require the electric car producers which want to apply for subsidies to reach the national technical standards set for battery energy density and energy consumption per 100 kilometers, according to the Caixin report.

The era of electric car producers enjoying the favorable government policies is coming to an end, Liu Bin, a chief expert at the China Automotive Technology and Research Center, said at a recent forum held in the southern Chinese city of Hangzhou. The research center is affiliated to the State-owned Assets Supervision and Administration Commission of the State Council

Currently, the government's support policies for new energy cars are mainly financial subsidies, leading to the fact that some automakers cheated on the national program to subsidize electric and plug-in hybrid cars. So far, several carmakers have been fined for this fraudulent behavior.

In the future, the government's support policies would be in favor of those new energy car producers which focus on technological innovation, Liu said.

On this aspect, some local carmakers have taken actions.

BYD recently unveiled its plans to become a competitive provider of new energy solutions. In order to achieve the goal, the Chinese automaker decided to reshape its organizational structure by splitting the units of battery, parts and components, onboard software as well as mould development.

The independent operations of these divisions will help enable all the departments to bring their unique superiority into full play to seek new profit and growth points, according to the company.

BYD Chairman Wang Chuanfu said that the move "clearly sends a signal of BYD's determination of enlarging the new energy industry chain".

In 2018, China is set to adopt a comprehensive set of rules which cap the average fuel consumption for automakers and formulate the annual proportion of producing various types of new energy vehicles. The rules apply to the car manufacturers which produce or import more than 30,000 traditional cars annually, and those who fail to comply must buy credits or face fines.

The cap-and-trade policy is widely seen by industry insiders as a proactive way for further reducing subsidies for new energy cars.

At present, the final version of the subsidy policy has not been confirmed.

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