China to Renew, Expand EV Subsidies

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China’s Ministry of Finance has confirmed their intention to extend China’s electric vehicle subsidy program. Under the current plan, the subsidies were to be phased out at the end of 2015.

China’s EV subsidy policies have never been well defined. The first round of subsidies began in 2008 or 2009 and provided generous subsidies to purchasers of plug-in hybrids and full electrics. Many thought this heralded an electric vehicle revolution in China. However, EV sales remained poor. It soon became clear that the devil was in the details. Though China provided generous subsidies, these subsidies were only available in 10-13 Chinese cities (sources vary) and the subsidies were restricted for use only on domestically-made vehicles (no imports….sorry). Furthermore, the subsidies were only available to fleet buyers who buy vehicles in bulk…not to the general population. Over time, the government adjusted the plan, expanding it to 26-28 (again…Chinese news sources don’t agree) cities and extending the subsidies to private buyers in about 6 of those cities. The plan expired at the end of 2012 having failed to stoke EV purchases all that much.

The second round of subsidies was launched in 2013 and featured slightly lower payouts. Furthermore, these payouts were to decline by 10% in 2014 and another 20% in 2015 and to expire at the conclusion of the year. The plan did remove a low-speed vehicle restriction and force government entities to source at least 30% of their EV purchases from companies outside their jurisdictions (local protectionism held back the first plan). Today’s announcment reduces the payout cut from 10% to 5% in 2014 and 20% to 10% in 2015. More importantly, 12 more cities will be added to the pilot program, bring the number of cities to 40. After 2015, a new subsidy program will take effect, of which no details have been released.

The expansion of China’s EV subsidy program is a great move, but questions linger. Do all 40 pilot cities subsidize private as well as fleet buyers? Will buyers receive payouts before they purchase the vehicles or will they have to apply for reimbursement later? Will China finally push through EV charging standards and roll out a standardized network of charging stations (as has been promised for years)? Clearer articulation of the policy would be helpful as well.

About the author  ⁄ Jeff Lundblad

Graduate from the University of Illinois in Political Science, Jeff Lundblad has been following China's emerging auto industry since age 15. He is an an occasional contributor to ChinaCarTimes and editor of the ChinaFocusNews portal.

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