China to extend subsidies for NEV purchases
April 7, 2020 Category China News Round-up, Weekly
Chinese authorities have decided to extend subsidies for new energy vehicles to 2022 to help invigorate the fledgling sector that has started to slow down since the second half of last year. The subsidies, which have been in place since 2009 and were scheduled to expire by the end of this year, will continue for another two years, the Chinese government announced, without revealing any further details. Buyers of electric cars, plug-in hybrids and fuel cell vehicles, will get purchase tax exemption. The tax usually amounts to 10% of a car’s price. Thomas Fang, Partner in the China office of Roland Berger, said: “The goal of the measures is to bolster demand as soon as possible to revitalize the whole sector, as efforts to contain the novel coronavirus outbreak have started bearing fruit.” In the past weeks, the Chinese government also decided to expand the country’s charging network for new energy vehicles.
BJEV, one of the country’s largest new energy vehicle makers, said the extension of subsidies will promote the sector’s long-term, healthy development. China’s new energy vehicle sector started to lose steam from the second half of last year following the latest round of subsidy cuts in late June. Some carmakers including Xpeng had to raise vehicle prices to prevent losses, while others prevented price hikes by taking money out of their pockets. Total NEV sales stood at 1.21 million units last year, a 4% fall on a yearly basis and the first in over a decade in China.
Most of the carmakers were affected to some extent, with Warren Buffett-backed BYD reporting a 42% fall in 2019 net profit to CNY2.78 billion. BJEV sold 156,000 vehicles last year, falling short of its goal of 220,000 units. Hit by the Covid-19 pandemic, sales of new energy passenger vehicles in the first two months stood at 55,000 units, down 57% year-on-year, while production plummeted 63%, according to the China Passenger Car Association (CPCA). Cui Dongshu, Secretary General of the Association, said thanks to the extension of subsidies, production this year is estimated to surge 23% from 2019 to 1.6 million units. Cui, however, did not offer an estimate of the sales for this year. China has been the world’s largest new energy vehicle market since 2015, the China Daily reports.
China is also revitalizing other segments of the car market. The aim is to stabilize new car sales, loosen purchase restrictions in certain cities and invigorate the used-car market in a bid to unleash the consumption potential for cars, Wang Bin, Deputy Director of the Department of Market Operation and Consumption Promotion of the Ministry of Commerce (MOFCOM) told reporters. Car sales accounted for 9.6% of total retail sales in 2019. Tax revenue and employment in the auto and related industries made up 10% of the country’s total, he added. Overall, car sales plunged 42% year-on-year during the first two months of this year.
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