China has confirmed through four key ministries it will end its new energy vehicle (NEV) subsidy policy on 31 December 2022, prompting carmakers to adjust their prices, Kallanish reports.

Following the previously announced plan, the Chinese government is now cutting subsidies by 30% for vehicles used in non-public domains and 20% for those used in public domains – including public transportation, supply chain operations and public affairs.

Passenger cars with a price above CNY 300,000 ($47,159.09) before the subsidy are not eligible for this incentive. Pure electric cars (BEVs) with cruising ranges of 300-400 kilometres can claim a subsidy of CNY 9,100. BEVs with cruising ranges greater than or equal to 400 km, the subsidy is CNY 12,600.

Plug-in hybrid electric vehicles (PHEVs), including extended range ones, with ranges over 50 km (NEDC) or 43 km (WLTC) can get CNY 4,800 in subsidy.

As the policy was confirmed last Friday, Tesla announced a price increase. Tesla China’s official website shows that the price of Model 3 rear-wheel drive version has been adjusted to CNY 265,652 – that’s an increase of CNY 10,000 from the previous price. The price of Model Y rear-wheel drive version has been adjusted to CNY 301,810, which now doesn’t meet the new subsidy requirements.

Nio released a consumer-friendly plan, under which users who have paid a deposit to purchase an ES8, ES6 or EC6 before 31 December 2021, as well as picked up the cars before 31 March 2022, can still enjoy the 2021 national subsidies. The difference will be carried by Nio. The brand’s premium BEVs are mainly priced over the effective subsidy price cap.

XPeng also introduced a price-maintenance strategy. That is, users who paid the deposit within 1-10 January 2022 can enjoy the 2021 subsidies, at the carmakers’ expense.

FAW-Volkswagen has launched the latest purchase policy for the ID.4 CROZZ and ID.6 CROZZ. For purchases of ID CROZZ models made before 28 February 2022, last year’s subsidies will still be available for consumers. After the deadline, there will be increase in the car prices. 

The end of subsidies in the largest NEV market in the world is seen as both a positive and a negative factor, with implications domestically and internationally.

“This [the new subsidy] is good for us,” said Shen Hui, the founder and chairman of Weltmeister.

According to Cui Dongshu, the secretary general of China Passenger Car Association (CPCA), “the new subsidies will benefit the market as it relaxes the upper limit from the estimated 2 million vehicles, and now it is effective throughout 2022.”

Tian Yongqiu, a senior analyst in the automotive industry believes termination of subsidies by the end of 2022 “will trigger another round of panic buying.” He forecasts the sales surpass 5 million units this year and that “it’s very likely for NEVs to achieve the 25% shares of the general vehicle market three years ahead of target.”

Meanwhile, Xu Haidong, deputy chief engineer of China Association of Automobile Manufacturers (CAAM) says the final decision on the price is still driven by market factors, and with the overall expansion of the NEV market, the cost will be further amortised. “Therefore, the latest subsidy policy will not bring significant changes to the NEV market in 2022. As for [policy-triggered] ‘panic buying tide,’ it will not become the mainstream.”

For Ouyang Minggao, a scholar at the Chinese Academy of Sciences and chairman of the China EV100 Association, in the long run, although the subsidies will be terminated, non-subsidy policies such as double points, carbon emissions, and travel restrictions will still play important roles. “At the same time, with the rise in oil prices, compared with EVs, the cost of using fossil fuel vehicles has increased. Therefore, the impact of subsidy decline will not be massive,” he adds.