China's green car subsidy scandal spreads, 20 more car makers named

BEIJING (Reuters) - China has accused more than 20 additional car makers, including Nissan and Hyundai, of breaking rules on green car subsidies, according to a state media report, widening a scandal over a $4.5 billion annual payout program.

On Thursday, China’s Ministry of Finance punished at least five car makers, accusing them of cheating its program to subsidize electric and plug-in hybrid vehicles, receiving roughly 1 billion yuan ($150 million) in illegal subsidies.

“This is a major blow to the industry and also has a large impact on the country’s policy enforcement,” Xu Yanhua, a vice secretary for the China Association of Automobile Manufacturers told a news briefing.

The ministry said it would revoke the production license of Suzhou Gemsea Coach Manufacturing, while the other four firms would be fined. The companies named included a subsidiary of Chery Holding [CHERY.UL], owner of the seventh most popular Chinese passenger car brand.

The scandal has cast a pall over China’s drive to use subsidies to combat heavy pollution which affects large swathes of the country. This drive helped sales of electric and plug-in hybrids more than quadruple last year to 331,000 vehicles.

China’s official Securities Daily newspaper reported on Friday that there was a list of an additional 20 companies who were also found to have committed violations.

These include Japan’s Nissan, South Korea’s Hyundai, Geely, Anhui Jianghuai Automobile (JAC Motor) and a subsidiary of BYD.

“As we understand the government investigation is proceeding, we cannot comment on this issue at this stage,” a Hyundai spokeswoman said in a written statement.

Nissan did not respond to requests for comment. Geely declined to comment.

A BYD spokeswoman said the firm had not received any official notification from authorities. “Right now we do not have any idea where the suspected list is coming from.”

A spokesman for JAC Motor, which this week announced it was exploring a potential joint venture focused on electric vehicles with German carmaker Volkswagen AG VOWG_p.DE, said the firm did not have an immediate comment.

The subsidy cheating investigation is another blow to China achieving a full-year sales target of 700,000 electric and plug-in hybrid cars, said Yale Zhang, managing director of consultancy Automotive Foresight.

Only 245,000 such cars were sold in the first eight months of the year, according to China’s automakers association.

China spent $4.5 billion last year in subsidies for such vehicles, although it is set to gradually phase out the payments by 2021.

($1 = 6.6635 Chinese yuan)

Reporting by Jake Spring; Additional reporting by Adam Jourdan and Fang Cheng; Writing by Adam Jourdan; Editing by Clara Ferreira-Marques and Edwina Gibbs