What Happen to China Carmakers when Electric Vehicle Subsidy Gets Cut?

The China’s government plans to phase out subsidies after 2020 as central and local governments have spent 15 billion yuan ($2.3 billion) on subsidies which likely replaced by California-like zero-emission carbon credits system.

China will consider mandates that carmakers produce more electric vehicles or purchase carbon credits from their peers, potentially emulating California’s system and transitioning from a subsidy-driven approach to catalyzing cleaner cars.

The proposed rules will mandate that certain automakers produce or import new-energy vehicles in proportion to the number of fuel-burning autos they sell, according to a draft document prepared by the National Development and Reform Commission. Companies that fail to achieve carbon dioxide emission reduction targets would be required to buy credits or pay fines of as much as five-times the average price of the credits, the country’s top industry regulator and policy maker said.

China has encouraged consumers to switch from fossil-fuel burning vehicles to electric cars and plug-in hybrids, with the aim of reducing pollution and support companies in developing what it sees as the dominant auto technology of the future. The latest proposal was prepared after studying California’s zero-emission vehicle mandate.

China surpassed the U.S. as the largest market for electric vehicles last year and wants sales new-energy vehicles to exceed 3 million units a year by 2025. To encourage production and sales of such vehicles, central and local governments have spent 15 billion yuan ($2.3 billion) on subsidies since 2009. The government plans to phase out subsidies after 2020.






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