China to further cut electric vehicle subsidies in 2021

China will reduce its subsidies for regular new energy vehicles (NEVs) by 20pc in 2021 from a year earlier, according to the country's ministry of finance.

Subsidies for NEVs used in the public transport sector, including new energy urban buses, commercial passenger vehicles, taxis, sanitation vehicles, logistics vehicles, mail services vehicles, airport shuttle buses and government cars, will be cut by 10pc this year in order to accelerate electrification in the sector.

Technical standards that car manufacturers have to meet to apply for subsidies, such as battery energy density, driving ranges and energy consumption will be unchanged in 2021. A pure electric car should have a minimum driving range of 300km to qualify for a subsidy of 16,200-22,500 yuan ($2,500-3,500) in 2020. The minimum driving range for a plug-in hybrid is 50km for a subsidy of Yn8,500.

The government will further strengthen its safety supervision on NEVs. Subsidies will be suspended or voided if the manufacturer is guilty of causing accidents because of inadequate safety systems, or for not recalling the vehicle after it discovers problems.

The country will also take measures to curb blind investment and unauthorised construction of NEV production projects to prevent overcapacity. The measures include strictly controlling output growth, optimising inventory management, implementing the admission standards for new production projects and output expansion plans and encouraging mergers and reorganisations of larger companies.

China's NEV production and sales have been declining since July 2019 following Beijing's cuts in subsidies and a slowdown in the country's economy growth. The Covid-19 outbreak at the beginning of 2020 also further weighed on the domestic NEV industry.

The government in April 2020 announced that it would extend its subsidy scheme to the end of 2022 to boost NEV adoption in the wake of Covid-19. It had planned to reduce subsidies on regular NEVs by 10pc in 2020, and by 20pc in 2021 and 30pc in 2022.

The NEV market began to recover in the second quarter of 2020, supported by a variety of government stimulus measures to encourage the use and purchase of such vehicles. The country sold 1.109mn NEVs during the first 11 months of last year, up by 3.9pc from the same period in 2019, according to China's automotive manufacturers association.