Tesla May Need To Adjust Prices To Qualify For New EV Incentives In China — To Where They Just Were

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The Chinese government can’t seem to make up its mind on EV incentives. It wants people to drive electric cars, but the cost of its original incentive program was breaking the bank and clogging up the roads with crappy short-range EVs that were giving the whole electric car industry a black eye with consumers.

Tesla Model 3 price in China
Credit: Tesla

A few months ago, the government announced that a plan to cut EV incentives in July had been placed on hold. Then this past week, it surprised everyone by announcing a 10% reduction in subsidies this year but with the program getting extended until 2022, according to a report by Reuters. But there’s a kicker. Cars costing more than 300,000 yuan ($42,376) will no longer qualify for incentive payments. The announcement also says incentives will be cut 20% in 2021 and 30% in 2022.

As the changes were being announced, Tesla raised the price of its least expensive model in China from 299,050 to 303,550 yuan, says CNET. The reduction in the EV incentive will phase in over a 3 month period, so Tesla will have some time to react by adjusting its prices once again to stay below the 300,000 yuan ceiling.

Direct cash incentives are all well and good, but indirect subsidies may have as much to do with the decision by a Chinese customer to buy an electric car as the net cost. In most Chinese cities, it is virtually impossible to register a conventional car with a gasoline or diesel engine because of overcrowding, but EV buyers can register their cars and start driving them almost immediately. Other perks such as free parking and free charging in some cities just sweeten the pot.

No doubt, Tesla will find a way to adapt and adjust to the new incentive rules. Its cars are in high demand in China. It has juggled deliveries and prices in other situations to maximize the number of customers eligible for US or Canadian incentive programs. Still, a little more predictability from Chinese officials would surely be welcome.

As we reported just yesterday, the Tesla Model 3 is actually leading the Chinese EV market so far this year, and by a large margin — nearly double the sales of the #2 BYD Qin Pro EV. That has been in good part thanks to the Tesla gigafactory in Shanghai (Giga Shanghai), which ramped up production and deliveries in the first quarter.

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Steve Hanley

Steve writes about the interface between technology and sustainability from his home in Florida or anywhere else The Force may lead him. He is proud to be "woke" and doesn't really give a damn why the glass broke. He believes passionately in what Socrates said 3000 years ago: "The secret to change is to focus all of your energy not on fighting the old but on building the new."

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