On Monday, China’s National Development and Reform Commission, together with the Ministry of Industry and Information Technology, the Ministry of Finance and 10 other official departments, proposed plans to continue implementing preferential policies for citizens’ purchases of new energy vehicles (NEVs), rewarding charging facilities and reducing or exempting travel tax in 2022. However, the subsidy rate has declined by 30% compared with 2021.
At the same time, the departments confirmed that the subsidy policy for the purchase of new energy vehicles will be officially terminated in 2022, and vehicles licensed after December 31 this year will no longer be subsidized.
Taking ordinary pure electric passenger cars with a battery life of 400 kilometers and a price of less than 300,000 yuan ($47,366) as an example, in 2021, customers can enjoy a subsidy of up to 18,000 yuan. But in 2022, the subsidy will drop from 18,000 yuan to 12,600 yuan.
For vehicles with a cruising range between 300 km and 400 km, the maximum subsidy will be 9,100 yuan, and the subsidy for plug-in hybrid vehicles will be 4,800 yuan.
The tightening of subsidy policies for NEVs will affect consumers’ purchasing habits. Under the dual pressure of supply chain shortages and the gradual cancellation of subsidies, NEVs are becoming less attractive to customers. In the past, some consumers would buy NEVs because they were well configured, affordable and subsidized, but they were still inferior to fuel-based vehicles in terms of charging facilities and endurance. Without subsidies, consumers may think more about fuel-based or hybrid cars when exploring the market.
In order to retain consumers, car companies have to improve the quality of products, facilities and services, which is not necessarily a bad thing for consumers in the long run. The termination of subsidies will also accelerate the competition and resource integration among NEV enterprises, so that car companies can better control production and sales costs.