Struggling Automaker Cuts Cord on Electric Truck Purchase

A struggling maker of traditional vehicles in central China’s Anhui province said on Thursday it is scrapping plans to buy a new-energy truck-maker, following Beijing’s introduction of new policies to weed out cheats who purchase such vehicles to obtain generous state refunds.

Hualing Xingma Automobile, which makes specialty cars and heavy trucks under the CAMC brand, signed a framework agreement in June to buy Xinchufeng Special Automobile Ltd., a maker of electric-powered heavy trucks and school buses in nearby Hubei province. But it recently decided to terminate the deal, it said in a filing to the Shanghai Stock Exchange.

The company cited complexities with the deal for the termination, and said it would provide further explanation at a shareholder meeting set for Monday. Its shares have been suspended from trading since March pending a major reorganization.

The Xinchufeng purchase was originally intended to provide a new lift for Hualing Xingma, which posted losses in 2014 and 2015 amid weak demand for its specialty vehicles. It was able to post a profit last year after receiving a 360 million yuan ($53.5 million) injection from one of its top stakeholders, narrowly dodging a stock exchange rule requiring delisting for any company that posts net losses for three consecutive years.

China has aggressively promoted new-energy vehicle development over the last decade in an effort to clean up the country’s polluted air and develop cutting edge-technologies that can be exported. It has offered generous subsidies to achieve that aim, leading to abusive practices by buyers who bought vehicles just to get subsidies without any intention of driving them.

In an effort to overhaul that system, China at the end of last year revised its policy for new-energy vehicles not intended for personal use, saying buyer subsidies could only be obtained after a vehicle had driven 30,000 kilometers (18,640 miles). Many commercial-vehicle buyers have balked at such a requirement, worried that such vehicles like the ones by Xinchufeng aren’t suited to long-distance driving and could require years to reach the 30,000-kilometer threshold.

Contact reporter Yang Ge (geyang@caixin.com)