Multiple regional authorities in China are issuing stimulus measures in a bid to shore up demand for electric vehicles, ranging from cash subsidies to free parking lots, as China’s central government ends its massive decade-long EV support campaign.
Why it matters: The government measures come as sales in the world’s biggest EV market start to show signs of slowing down. The local subsidies underscore China’s continued support of green energy transport, despite the central authorities phasing out EV purchase subsidies altogether a month ago after more than a decade. In September, Beijing extended its 5% purchase tax exemption for EVs to the end of 2023.
- On Jan. 18, Tian Yulong, a spokesperson for the Ministry of Industry and Information Technology, said China would continue to create a supportive and healthy regulatory environment for EVs by ensuring the stable supply of core components and funding the build-up of charging infrastructure. This will include laying down stricter rules for EV production licenses and completing the regulatory framework for battery recycling.
READ MORE: Chinese EV makers rush to boost year-end sales as subsidies expire
Details: The Shanghai municipal government on Sunday announced the extension of its EV subsidy program launched last May in the wake of a months-long city-wide lockdown. Consumers will continue to receive rebates of RMB 10,000 ($1,482) per car for any trade-in of internal combustion vehicles for EVs until June. 30, as part of a stimulus package aimed at propping up the local economy, details of which were released on the government’s official website.
- On the same day, the provincial government of Zhejiang called on municipalities to hand out cash incentives to current gas-fueled car owners who plan to shift to EVs. The eastern Chinese province will permit EVs to park for free at public facilities for the first hour, as it aims for 60% of cars it produces to be EVs by 2025, according to an action plan published by the regional government.
- On Jan. 28, the northern province of Shanxi also rolled out a package of 14 measures to stimulate car demand, including incentives for public EV bus operators, tax breaks for personal EV purchases, and parking discounts. This followed similar initiatives released last month by the provincial governments of Heilongjiang, Henan, and Yunnan to fund EV adoption.
Context: Beijing began granting subsidies to EV buyers across China in 2010, deliberately trimming the purchase incentives starting in 2015 when it found that EVs with a range of over 400 kilometers (249 miles) were qualifying for subsidies of as much as RMB 54,000 per unit. The generous subsidies were cut by more than half to RMB 25,000 in March 2019, leaving China’s sales of new energy vehicles (NEVs), mainly all-electrics and plug-in hybrids, down 4% annually to 1.2 million that year.
- Beijing later introduced a gradual scheme which cut the subsidies by 10%, 20%, and 30% from 2020 to 2022 in the hope of stabilizing the market. EVs with a driving range of over 400 km enjoyed a subsidy of RMB 12,600 in 2022 before subsidies were fully scrapped in December. There were more than 13.1 million NEVs on the road as of 2022, according to figures from the ministry of public security.
- China’s NEV sales nearly doubled to 6.8 million units in 2022, according to figures from the China Association of Automobile Manufacturers (CAAM). Despite this, the market shifted into a lower gear in the second half of last year, as restrictions on free movement related to the Covid-19 pandemic hit consumer demand and disrupted the supply chain.
- Sales of passenger NEVs increased 35% year-on-year to around 640,000 units in December, and the number is expected to rise by just 1.8% year-on-year to 360,000 units in January, according to estimates by the China Passenger Car Association.
