China To Reduce NEV Subsidies Because Plug-In Sales Recovered

The plan is to reduce subsidies in 2021 by 20%.

According to the Chinese finance ministry, in 2021, subsidies for New Energy Vehicles will be cut by a fifth.

The news comes right after plug-in electric car sales not only recovered, but significantly accelerated and reached a new all-time monthly record in November.

The brief media reports say that subsidies for passenger cars will be 20% lower, while for public transport (buses, taxis) by 10%.

The move sounds reasonable and we guess it should not affect the market significantly enough to hamper the growth, as the bigger cut did in mid-2019. Subsidies will be available at least until the end of 2022.

It will be very interesting to see whether China will continue to support EVs with swappable batteries more than others (no price cap), which significantly helped NIO to surge in 2020.

China expects to see sales of 1.8 million NEVs in 2021 (compared to an expected 1.3 million in 2020) and achieve a NEV market share of 20% by 2025 (it’s almost 6% this year).

We must remember that subsidies are not the only tool supporting NEV adoption, as China has imposed a requirement on manufacturers to get a certain score (number of credits) for NEV sales. This requirement will increase in 2021 from 12% to 14% (although since a single plug-in can get 2-6 credits, manufacturers will comply with just a small NEV share – like 2% BEVs or 7% PHEVs if we understand it right).


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