CHINA BETS ON CASH SUBSIDIES TO SPUR ELECTRIC-CAR SALES
Authorities likely to follow Guangdong’s lead to reintroduce incentives after lockdowns hit industry
Local governments on the mainland are likely to reintroduce cash subsidies to bolster sales of electric vehicles after the industry took a savage hit from the Covid-19 outbreak, according to analysts.
Provincial-level governments may distribute billions of yuan to buyers of battery-powered vehicles in the coming months after Guangdong province spearheaded the move last week to support battered car manufacturers.
“Cash subsidies can give carmakers a shot in the arm and generate multibillion-yuan sales,” said David Zhang, a researcher at the North China University of Technology.
“Lockdown measures have caused severe damage to the once-buoyant sector and it is necessary to spur sales of electric vehicles through incentives.”
Local governments had previously offered cash incentives to buyers but were ordered by Beijing to stop doing so in 2019.
In the last two months, lockdowns in Shanghai, the mainland’s motor industry hub, and Changchun, the capital of Jilin province, exacerbated vehicle supply chain bottlenecks and deterred consumers from buying electric cars.
Sources at car manufacturers and dealers said they were lobbying local governments to follow Guangdong’s move.
The Guangdong government announced at the weekend those buying a new electric car to replace another vehicle would receive a subsidy of 10,000 yuan (HK$11,900) in May and June. Buyers of a petrol car will be awarded 5,000 yuan, as the government aims to support the entire vehicle industry.
The electric vehicle sector, a new bright spot in the mainland economy, bolstered by efforts to achieve carbon neutrality by 2060, has emerged as a backbone industry in some provinces.
Analysts said Jilin and local authorities in the Yangtze River Delta, such as Shanghai, Jiangsu and Zhejiang, would probably grant cash subsidies to promote sales of electric vehicles.
In Shanghai, Tesla’s factory lost about 50,000 vehicles in production as the assembly line sat idle between March 28 and April 18.
Deliveries of smart electric vehicles from the country’s three biggest Tesla rivals – Nio, XPeng and Li Auto – halved last month.
The vehicle industry is one of the mainland’s biggest employers, providing jobs for one in every six of its workforce of 800 million people, according to analysts’ estimates.
“If the electric vehicle market in Shanghai cannot turn around after the citywide lockdown is lifted, dozens of dealers will have to close and thousands ... will lose their jobs,” said Tian Maowei, a sales manager with Yiyou Auto Service in Shanghai. “Government support [to stimulate sales] is badly needed.”
The China Passenger Car Association forecast in February sales of new-energy vehicles – pure electric, plug-in hybrid and fuel-cell cars – could top 5.5 million units in 2022, 84 per cent higher than last year.
In March, 455,000 such cars were delivered to buyers, a jump of 122.4 per cent from a year ago.
The cash incentives started in 2009, but sales remained weak until the subsidy peaked at 100,000 yuan in 2014.
An all-electric car with a range of more than 400km is now eligible for a 12,600 yuan subsidy, according to the Ministry of Finance. It said at the end of last year the subsidy would be scrapped next year.
Cash subsidies can give carmakers a shot in the arm and generate multibillionyuan sales
DAVID ZHANG, RESEARCHER