Policy update

China announced 2020–2022 subsidies for new energy vehicles

Engineering & manufacturing

The latest adjustment to China’s central subsidy program for new energy vehicles (NEVs) was released on April 23, 2020 and will fully take effect on July 23, 2020, after a three-month transition period. Importantly, although national subsidies were set to expire at the end of 2020, the update extends them for another two years, until the end of 2022. This largely stems from a desire to stimulate the automobile market amid the global downturn in the industry and the COVID-19 pandemic. As in prior adjustments, the subsidy sizes are phased down and vehicles must meet minimum technical and performance criteria to qualify.

In addition to the extension, the adjustment for the first time introduces sales limits—subsidies will be limited to 2 million NEVs per year from 2020 to 2022. A vehicle price limit for passenger cars of CNY300,000 including tax is also introduced. Related to this, Tesla announced on April 30, 2020 that it would cut the pre-subsidy price of its standard-range Model 3 made in China from CNY355,800 to CNY291,800 to maintain eligibility. China also stopped providing subsidies for fuel cell electric vehicles (FCVs) on April 23, 2020. Instead, a new four-year pilot program focused on research and development and application demonstrations of FCVs is being launched in select cities. Details of benefits for cities successful in the pilot phase are to be announced in a separate policy document.