While China’s subsidies for new energy vehicles (NEVs) are being reduced by 30 percent this year from the 2021 level, another adjustment is seen as a major boon for the industry.
The cap on the number of NEVs that can benefit from subsidies has been lifted, better than the previous expectation of up to 2 million vehicles a year, the China Passenger Car Association (CPCA) said in a report released today.
Under the latest policy, China’s technical indicator framework and requirements for vehicles that can receive purchase subsidies remain unchanged, but the previous limit of 2 million vehicles has been lifted to a subsidy that can be used throughout the year, the CPCA noted.
With the rapid increase in the scale of the new energy industry chain and the ability to reduce costs, NEV sales are expected to see strong growth by the end of 2022, the CPCA said.
In its latest report, the CPCA reiterated the previous view of its secretary-general Cui Dongshu, saying that China’s NEV sales are expected to top 6 million units next year, corresponding to a penetration rate – the share of sales among all models – of about 22 percent.
Previous expectations of 4.8 million new energy passenger car sales in China by 2022 now need to be adjusted to 5.5 million, corresponding to a penetration rate of about 25 percent, the CPCA said.
With 1.3 million new energy passenger car sales in China in the fourth quarter of 2021, a significant increase in consumer acceptance and stabilization of subsidies will drive a surge in total NEV sales in China in 2022, the CPCA said.
China’s share of the global new energy passenger vehicle market will maintain a share of more than 50 percent, the CPCA said.
Four ministries, including China’s Ministry of Finance, said in a December 31 announcement that subsidies for NEV purchases in 2022 will be slashed by 30 percent from 2021.
For areas including city buses, road passenger transport, cabs, sanitation, urban logistics and distribution, postal and express delivery, civil aviation and airports, as well as government departments, the 2022 subsidy rate will be slashed by 20 percent from 2021.
This in fact does not come as a surprise. China’s Ministry of Finance released a plan on April 23, 2020 that the country’s subsidies for NEVs would be scaled back each year, saying that in principle the amount of subsidies would be reduced by 10 percent, 20 percent, and 30 percent each year from 2020-2022, respectively, from the previous year.
The 2020 policy mentioned that in principle, the annual subsidy size will be capped at 2 million vehicles. But the latest regulations do not mention that number, implying that the quantity limit was dropped.
Notably, the Ministry of Finance said in a separate announcement that the policy will no longer be implemented starting in 2023.