China’s Latest New Energy Vehicle Subsidy Rules Make Domestic EV-Makers Concerned

China has extended subsidies for new energy vehicles (NEV) for two more years but in gradually reduced amount. Meanwhile, the reduced subsidies are now only offered to models that are priced below 300,000 yuan ($42,400).

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China’s NEV subsidies will be cut by 10%, 20% and 30% between 2020 and 2022. After the adjustment, the subsidy for electric vehicles (EV) with a range between 300-400km will be 16,200 yuan ($2,290) in 2020, while this year an EV with a range greater than 400km id subsidized by 22,500 yuan ($3,180).

Additionally, the subsidies can now only apply to NEVs that cost less than 300,000 yuan. More expensive models such as Tesla’s China-made Model 3 which just misses the limit with a price of 323,800 yuan ($45,800) and luxury models like BWM i series will be excluded.

Li Xiang, CEO of Chinese EV-maker Leading Ideal, said on social media that the 300,000 price limit is probably designed for Tesla to devastate domestic EV brands. He thinks it gives Tesla a reason to lower the price of the standard version of the Model 3 to below 300,000 yuan. The subsidized Model 3 will be a big in the domestic EV market with price range between 200,000 yuan and 400,000 yuan.

Li Xiang’s opinion was echoed by He Xiaopeng, CEO of another Chinese EV-maker Xpeng. He predicted that Tesla’s China-made Model 3 will cost about 277,500 yuan after deducting the subsidy, which means much higher pressure for home brands that sell between 150,000 yuan and 400,000 yuan.