China toughens subsidy program for new energy vehicle companies

A visitor takes a picture of a Neolix self-driving vehicle at the IEEV New Energy Vehicles Exhibition in Beijing, China October 18, 2018. Picture taken October 18, 2018. REUTERS/Thomas Peter

BEIJING (Reuters) - China has raised its standards for new energy vehicles (NEV) that qualify for subsidies and reduced the amount it is willing to provide to relevant companies, as it looks to wean the sector off government support.

The country rolled out a generous 5-year subsidy program for the NEV sector in 2016 to support sales and encourage innovation. But it has been slowly rolling back the program and plans to phase out subsidies after 2020 amid criticism that some firms have become overly reliant on the funds.

The Chinese finance ministry late on Tuesday said in a document on its website that it would cut the subsidy for battery electric cars with a range of 400 kilometers and above to 25,000 yuan ($3,720.07) per vehicle from 50,000 yuan in the next three months.

It also raised the standards for vehicles eligible for subsidies, saying that electric cars need to have a range of at least 250 kilometers, compared with 150 kilometers previously, according to the statement.

The ministry also said local governments should improve policies and stop offering some subsidies, but to support infrastructure construction such as that of electricity charging machines.

Shares in NEV makers such as BYD, BAIC BluePark, and battery suppliers like Contemporary Amperex Technology Ltd fell between 1 percent and 2.5 percent on Wednesday even as the Shanghai and Shenzhen stock exchanges gained.

China’s NEV market has continued to grow significantly even as overall auto sales declined last year for the first time since the 1990s.

Reporting by Yilei Sun and Brenda Goh; Editing by Rashmi Aich