China cuts subsidies on new energy vehicles by 30% in 2022 and withdraw them completely by the end of the year, as released by the Finance Ministry on Friday. This might impact EV sales positively.
Chinese government reduce consumer subsidies to provide on charging infrastructure
For a long time, China has been forward-thinking in pushing for EV industry growth, to alleviate urban air pollution, high greenhouse gas emissions, and growing dependence on oil imports.
Comprehensive EV policies and strategies has been enforced since 2009, to help China become dominant player in global EV market, providing consumer subsidies that have been purposefully designed to be closely linked to technological metrics and performance indicators across EV models.
“The policies has been instrumental in promoting market share growth,” said Cui Dongshu, secretary-general of CPCA. CCA data also show that China’s NEV delivery from that of 5,209 units in 2009, to 1,367,000 units in 2020, much exceeded expectations.
While subsidies make EVs more accessible to consumers, they are expensive.
As EV market gradually mature, Chinese government shifts resources towards charging infrastructure, as public charging outlets are concerning matters for EV adoption transition, as released on Electric Vehicle Charging Infrastructure Development Guidelines (2015-2020).
Reduced consumer subsidies are likely to encourage sales in 2022
The ministry had said in April 2020 that NEV subsidies would be cut from 2020 to 2022 by 10%, 20% and 30%, respectively. Consumers are naturally affected by the decrease in subsidies.
Cui Dongshu, secretary-general of CPCA stated that the policy will inevitably promote a sharp increase in the total sales of NEVs in 2022.
China OEM makers adjust to reduced subsidies with increased pricing
Whilst Tesla immediately increased model prices respectively, other car makers have also made relative adjustments accordingly.
Note that NIO has considerately went extra miles, catering to consumer’s needs.
NIO provide 2022 subsidy plan for those that made purchase on ES8, ES6 and EC6 before December 31, 2021 (inclusive), and who completed pick up before March 31, 2022, will still be eligible for subsidies in accordance with the 2021 national subsidy standard, in which NIO will be responsible for the price difference.
Xpeng also launched the subsidy plan from January 1 to January 10, 2022. If customers complete the deposit payment during the above period, they will enjoy the proposed retail price after the comprehensive subsidy remains the same as in 2021.
EV industry remains optimistic shifting from policy-driven to market-driven
“Even if the price of new energy vehicles has increased, it is a short-term phenomenon.” Cui Dongshu believes that “To remain competitive in the market, companies will advance in technologies to cater to market needs. But in the short term, car companies still have to face the pressure brought by the post-subsidy stage.”
Cui Dongshu, secretary-general of CPCA
As EV industry shifts from policy-driven to market-driven, impact of subsidies on supply chain, EV makers and consumers will gradually become more limited.
Market expectation on China EV car sales in 2022 remain optimistic, to be close to 4.8 million units, which has now been adjusted to 5.5 million units, with a new energy passenger car market penetration rate of about 25%. Overall new energy vehicle sales are expected to increase to 6 million units, with a market penetration rate is around 22%.
