New Energy Vehicle Subsidy Adjustment Immediately
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In the fourth quarter of 2017, as car and battery manufacturers were pushing for sales, a shocking announcement spread quickly: the government would accelerate the withdrawal of subsidies for new energy vehicles in 2018, with major changes coming. This news sent shockwaves through the industry, especially for companies that had already faced subsidy adjustments in 2016. The once-anticipated peak season for new energy vehicles was now clouded with uncertainty.
According to Battery China Network, various versions of the subsidy policy circulated online starting from mid-to-late October. Initially, it was reported that the subsidy cut would be 20% in early 2018, then increased to 40%. Later, details from the Ministry of Finance’s draft review suggested a more detailed approach, focusing on specific energy density requirements. All signs pointed to a firm decision to adjust subsidies in 2018, even though the official plan had not yet been released.
Zhou Bo, director of the Power Battery Application Branch of the China Chemical and Physical Power Industry Association, believes the subsidy adjustment will help improve product quality and promote resources toward leading enterprises. While this could lead to industry consolidation, it also raises concerns about potential disruptions in 2018.
Looking at the broader picture, the National Medium- and Long-Term Development Plan for the Automotive Industry sets targets for new energy vehicle production and sales by 2020, aiming for 2 million units annually, with power batteries reaching 300 Wh/kg or higher. By 2025, new energy vehicles are expected to account for over 20% of total sales, with further improvements in energy density and cost reduction.
Financially, the Ministry of Finance has allocated 30 billion yuan annually for subsidies. As the number of new energy vehicles increases, per-unit subsidies are likely to decrease. Recent reports suggest the subsidy criteria have become more detailed and targeted.
One key detail is the adjustment of system energy density. Instead of a 40Wh/kg increase, the threshold is set at 20Wh/kg. For example, pure electric passenger cars need to reach 160Wh/kg to qualify for a 1.1x subsidy, while buses must hit 155Wh/kg for a 1.2x subsidy. These standards reflect the industry's long-term goals but pose challenges for manufacturers.
Currently, many battery companies are struggling to meet these targets. For instance, LiFePO4 batteries in buses have a group efficiency of around 80%, while ternary batteries in passenger cars require a much higher energy density. This means significant R&D and production efforts are needed, adding to costs and delays.
Another focus is on controlling the market for pure electric passenger cars. A nationwide “one-size-fits-all†subsidy cut is unlikely; instead, policies may target specific models. High-mileage vehicles are encouraged, while low-range models face steep reductions. This shift aims to push the industry toward higher-quality, longer-range vehicles.
Despite debates over the best path for China’s new energy vehicle development, high-range models remain a priority. However, current subsidies have led to an oversupply of low-end models, which the government seeks to correct. This policy change is expected to drive innovation, reduce costs, and improve industry quality.
Overall, the subsidy adjustments are shaping the future of the new energy automotive industry, balancing growth, sustainability, and competitiveness. While challenges remain, the direction seems clear: a stronger, more efficient, and more focused industry is on the horizon.