Caixin
Jan 16, 2017 04:26 PM
POLITICS & LAW

China to Wean Risky New-Energy Car Makers off Government Subsidies

(Beijing) — New-energy car makers in China will not get government subsidies in the future unless they innovate, a senior official said, as authorities crack down on false subsidy claims and an industry bubble.

The government will stop handing out subsidies to companies and vehicles whose technology is outdated, letting them drop out of the market, said Song Qiuling, a deputy director-general with the economy-building department of the Ministry of Finance, at a forum on Saturday.

China, now the world’s largest electric- and hybrid-car market, has been keen to boost growth in the industry as part of its efforts to reduce pollution.

The government started distributing generous fiscal subsidies to the sector in April 2015, but the industry has been rocked by scandals in which companies and buyers have made fraudulent claims to take advantage of the benefits.

China’s new-energy car ambition — and the subsidy program that has helped propel it — has prompted investors and companies from far-flung sectors, such as home appliances and the internet, to swarm into the market.

However, only a quarter of the more than 4,000 models of new-energy cars that have been given a production license have started being manufactured, China Automotive News reported in July, citing an official survey.

To crack down on abuse of the subsidies, authorities at the start of the year tightened rules by reducing the amount of the benefits and making them harder to obtain.

For example, subsidies given by various levels of local government must be capped at no more than 50% of those provided by the central government, according to regulations published at the end of last month. This is down from 100% in the past.

Requirements such as energy consumption, driving range and car-safety records were also included in the thresholds to get hold of the benefit.

Song, of the Finance Ministry, said Beijing intended to move even more aggressively by scrapping subsidies offered by local governments, but dropped the proposal due to objections from unnamed “various parties.”

She said Chinese manufacturers of electric and hybrid vehicles have yet to develop homegrown technologies to make electric-vehicle batteries, which has “severely impeded the growth of the new-energy car industry.”

Other problems with the sector included insufficient and hazard-prone charging facilities; an overreliance on subsidies; a reluctance to improve quality; and overcapacity at the low end of the product spectrum, all of which put a drag on the industry’s international competitiveness, she added.

Sales of new-energy cars surged 53% year-on-year to 507,000 vehicles last year, or 1.8% of total vehicles sales, according to data from industry group China Association of Automobile Manufacturers.

The government has set a goal to raise production of the vehicles to 2 million units by 2020 and increase their sales to 20% of the total by 2025, the official Xinhua News Agency reported Monday, citing Minister of Industry and Information Technology Miao Wei.

Contact reporter Fran Wang (fangwang@caixin.com)

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