April 29, 2015 / 7:20 AM / in 3 years

China to roll back electric vehicle subsidies faster

BEIJING, April 29 (Reuters) - China will scale back its subsidies for electric and plug-in hybrid vehicles faster than expected, while declining to give subsidies to traditional hybrids, according to policy documents posted on the finance ministry’s website on Wednesday.

The final version of the policy largely confirmed a previously released draft in setting levels for new energy vehicle subsidies in 2016, but will scale back those subsidies by 20 percent in 2017-2018 and by 40 percent in 2019-2020.

The draft had only called for two 10-percent reductions by 2020.

Traditional hybrid, which rely mostly on gasoline engines, remains a key peg of many company’s strategies in China, with Toyota Motor aiming to launch Corolla and Levin hybrid models later this year and Geely Automobile working on a hybrid version of its Emgrand 7 midsize sedan.

By rolling back subsidies faster, the government wants to pressure automakers to reduce their currently high price for new energy vehicles, rather than relying on subsidies to profit, said Yale Zhang, managing director of consultancy Automotive Foresight in Shanghai.

The highest subsidy for a single car is roughly 100,000 yuan ($16,119.7), as local authorities generally offer subsidies to match those of the central government, so a 20-40 percent reduction is quite large, he said.

The government subsidy scheme, along with an aggressive ratcheting up of emission and fuel economy standards by 2020, aims to bring relief to pollution choked cities in the world’s largest car market.

Chinese and foreign automakers unveiled plans for a slew of new energy vehicles at the Shanghai autoshow last week in an effort to meet the government’s stringent goals.

Shanghai GM, a joint venture between General Motors and SAIC Motor, said at the show that it would develop 10 new energy models by 2020.

The policy is “sending a signal to the car makers that the government is quite determined to use some of the stick instead of the carrot by the end of this decade,” Zhang said.

The scheme lays out in detail the subsidies based on the type of vehicle and the distance it can travel.

Electric and plug-in passenger cars will receive between 25,000 and 55,000 yuan per vehicle from the central government.

Notably absent from the document are traditional hybrid vehicles, whereas plug-in hybrids depend primarily on an electric battery. ($1 = 6.2036 Chinese yuan) (Reporting by Jake Spring; Editing by Anand Basu)

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