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Automobile Industry

China faces another electric vehicle subsidy scandal


Chinese Electric Vehicle

Chinese Electric Vehicle

Generous government subsidies have been behind China taking the lion’s share of global electric vehicle sales in recent years — but now they’re being called to question and face another scandal.

A panel of experts raised the flag over this scandal during a roundtable at the Fortune Global Sustainability Forum on Sept. 5, 2019 in Yunnan, China.

While the country saw its “new energy vehicle” sales spike 79 percent last year and its domination of global sales confirmed, that came from government-funded subsidies allowing automakers to offset their manufacturing costs and consumers to pay affordable, competitive purchase prices for electric vehicles (EVs).

“The consequence of the subsidy-fueled growth is that it also triggered excess production capacity, because everyone wants to benefit from government support,” said Claudia Liu, the regional compliance officer for Daimler Greater China.

Liu also commented that some unnamed companies have abused the subsidies, by reallocating funds earmarked for EV production.

The Chinese government attempted to clean up these inflated production and sales figures being used by foreign and domestic automakers three years ago, when the national ministry revoked the production license of a Chinese vehicle maker and fined four other companies. This year, Beijing has rolled out new performance-based subsidies for EVs, such as rewarding battery manufacturers that achieve certain thresholds in capacity, allowing EVs to travel further distances per charge.

Andy Zheng, founder of the Aspiring Citizens Cleantech analyst firm and another panelist speaking during the roundtable, thinks the government is missing the mark and that vital data and innovation are missing. “There’s a great anxiety about batteries and range but without data, we’re all just guessing,” Zheng says.

Zheng cited an example of one fleet of EV taxis not finding range to be an issue at all. City taxis in Shenzhen had been converted over to EVs in 2017 — but only 0.3 percent of the 22,000 electric taxis drove more than 50 kilometers (about 31 miles) per trip. He challenged automakers and the government to not just focus on EV range as the real issue behind making new energy vehicles attractive to automakers and car buyers well beyond inflated incentives.

“So how do we define excessive production?” Zheng asked. “Maybe excess is manufacturing that isn’t innovative. We need subsidies that support innovation.”

Tesla-competitor Nio, one of China’s many small EV startups, has already felt the pressure in the marketplace and the reality of making it in the EV business. While Nio was able to raise $1 billion last year when the automaker went public on Nasdaq, share prices tumbled 50 percent after reporting losses and a low volume — only 15,000 units of its flagship ES8 electric SUV as of May 2019 — accounting for only 1 percent of China’s EV sales. To offset a potential collapse, Nio agreed to a joint venture with Beijing E-Town International Investment and Development company. Competitor Tesla so far has been able to sidestep a JV.

Beijing’s Ministry of Industry and Information Technology, announced in late August that Tesla is receiving an exemption from a 10-percent purchase tax. It’s part of a broad national policy applying to domestic electric vehicles. Prior to that on August 20, Tesla was included in Shanghai’s Pilot Free Trade Zone, which will also help the EV maker gain a financial advantage in the world’s largest EV market.

Leaked photos are showing Tesla Model 3s on a production line in progress at the EV maker’s Gigafactory in Shanghai.

Tesla wasn’t named in the September 2016 scandal, but a subsidiary of its leading global competitor BYD, was called out. It was part of a list of 20 companies that committed violations — that list included Japan’s Nissan, South Korea’s Hyundai, and two of China’s giant automakers, Geely, and JAC Motor.

Other companies were called out for more severe violations. Five additional automakers were punished for cheating the national program after receiving about 1 billion yuan ($150 million) in these subsidies. Suzhou Gemsea Coach Manufacturing had its production license revoked, while four other companies were fined. One of them is a subsidiary of Chery Holding, owner of the seventh most popular Chinese passenger car brand.

China saw its first drop in recorded EV sales in July. Monthly global sales fell 14 percent with declines in China and North America during that month. Reductions in EV subsidies and a cooling economy impacted the China market. Another top auto market, India, is struggling to get consumers and rickshaw drivers to convert over to EVs and meet goals the government had laid out.

China’s overall new vehicle sales have been hammered after years of becoming by far the world’s largest market for vehicles powered by internal combustion engines. Sales are on track to post their worst year in history. Rising trade tensions and tariffs, a slowdown in China’s booming economy, and implementation of stricter emissions rules, have all had their impact.

Much of the June sales boom, the only postivie month in 14 months of decline, was fueled by dealers cutting prices way down to clear inventory and prepare for exhaust controls coming to new vehicles. Restrictions on new energy vehicles also took their toll.

China’s national government has been working hard at downsizing its subsidies, and hopes to see quality, well-made traditional engine vehicles and EVs take off in sales based on market demand.

Source: Oil Price Magazine – China faces another electric vehicle subsidy scandal

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About uwe.roland.gross

Don`t worry there is no significant man- made global warming. The global warming scare is not driven by science but driven by politics. Al Gore and the UN are dead wrong on climate fears. The IPCC process is a perversion of science.

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