China stated it’s scaling back subsidies on electric vehicles to support local manufacturers to depend on innovation instead of government assistance as the industry matures and costs drop. The cuts were deeper than expected and shares of the nation’s top EV makers slid.
The subsidy for pure battery electric vehicles with driving ranges of 400 kilometers (250 miles) and above will be slashed by half, to 25,000 yuan ($3,700) every vehicle from 50,000 yuan, the Ministry of Finance stated. To qualify for any subsidy, electric cars are required to have a range of at least 250 kilometers, compared with 150 kilometers earlier, the ministry stated.
The government had cautioned of its plans to scale back subsidies and phase them out entirely after 2020, though it hasn’t provided details. While financial support for purchases has fueled the rapid development of the country’s electric vehicle industry, there are concerns that automakers have become much reliant on them at the cost of developing new technologies and better vehicles.
Shares of BAIC BluePark New Energy Technology, the electric vehicle manufacturing unit of BAIC Motor, dropped as much as 3.5 percent today in Shanghai. BYD, the country’s leading seller of new energy vehicles, fell as much as 4.2 percent in Hong Kong.
BAIC BluePark stated it may raise vehicle costs going forward amid “certain and even relatively huge” pressure on the market. BYD stated it has made full preparations for embracing the new circumstances. Manufacturing scale and an edge in technology make the firm resistant to risk, it stated.
U.S.-listed advance depository receipts for NIO Inc fell about 5.4 percent to $5.06, the lowest intraday price since the company’s initial public offering in September.
“While the incumbent OEMs will observe some earnings damage, we consider NIO the most vulnerable of all,” stated Robin Zhu, a Bernstein analyst. “Regardless of struggle for demand, the company recently indicated it won’t reduce prices to offset lower EV subsidies. Today’s subsidy cuts mean NIO’s cars just got meaningfully more costly for consumers.”
