The Electric: China Tweaks Its Incentives for EVs

Today's column is from Dalibor Petkovic, a researcher specializing in Chinese industrial policies. Since 2017, he has focused on the Chinese EV market, as well as smart cities, urban logistics and battery recycling management. 

China looks like a success story in the global move to electric vehicles. More EVs were sold in China last year than were sold globally in 2020, and EVs now account for more than 20% of new car sales. But many of those sales rely on a system of government support that’s showing signs of strain.

The government has promoted EVs to reduce China’s dependence on imported oil, build a globally competitive auto industry and curb emissions. Since 2009, it has paid out $20 billion to subsidize EV purchases with payments of up to $1,600 per car. In 2019, it added an emission credit system, under which automakers are allotted credits for improving the overall fuel economy of their fleet and for producing a specified percentage of EVs. Companies that don’t meet these targets must purchase credits from those that do. Despite the subsidies and the credits, many EV-only makers are losing money. Nio and XPeng each lost more than $6,000 per vehicle they sold last year.