China Rethinking EV Incentives To Promote New Technology Solutions

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Every government knows if you want people to do something, give them free money. Norway leads the world in the percentage of electric cars sold because it offers its citizens the highest EV incentives. China is not far behind. Last year it doled out over a billion dollars in EV incentives to encourage its citizens to buy electric cars. Local authorities also offer additional incentives. But its leaders are rethinking their priorities. They plan to tweak the rules to encourage more long range electric cars and fewer short range vehicles, sources tell Bloomberg.

While changes are still being discussed, those sources say the new plan under consideration would require vehicles to have at least 125 miles of battery-only range to qualify for any incentives from the national government. The current standard is only 90 miles. In February, the government lowered the amount of incentives for cars with less than 180 miles while raising subsidies for cars with more than 240 miles of range to a maximum of $7,560 — a figure that is oddly similar to the federal tax credit available in the United States.

“China is switching away from carrots,” says Ali Izadi-Najafabadi, an analyst at for Bloomberg New Energy Finance. “The government wants to ensure automakers will launch models that would be appealing to consumers, hence setting subsidies contingent on minimum driving range requirements.”

Beijing Electric Vehicle Co. is China’s largest electric only vehicle manufacturer. Li Yixiu, the company’s sales chief, told the press on July 5, “Government policy has a huge impact over the new energy vehicle sector and every adjustment made on the policy front over the next two years will result in tremendous changes in the industry. We believe there isn’t a chance for car makers to raise prices to make up for the reduction of government fundings. Instead, we have to come up with competitive new products and services to respond.”

Last week, his company began offering battery swap and rental services to consumers to help reduce purchase costs and ease range anxiety. Its EV300 — a compact car that sells for $12,000 — now has an available plan that allows users to change batteries as often as they want for a monthly fee of $65.00

BNEF projects that half of all new vehicle sales and a third of all the cars on the road worldwide will be electrics by 2040. A large part of the change to electric vehicles will come when their purchase price equals that of conventional cars, which BNEF thinks will happen by 2025. “There has been a spurt of innovation in the industry,” said Steve Man, a senior autos analyst for Bloomberg Intelligence in Hong Kong. “This is a much needed transformation for the Chinese EV market.”