Briefing: China will cut subsidies for electric vehicles to spur innovation

By Chris Udemans
1 min read

China Scales Back Electric-Car Subsidies to Spur Innovation – Bloomberg

What happened: China will cut electric vehicle (EV) subsidies as it aims to spur innovation and counter manufacturer reliance on government assistance to drive sales. China’s Ministry of Finance said in a statement on Tuesday that, among others, subsidies for vehicles with a range of more than 400 kilometers would be cut by half to RMB 25,000 (around $3,700). The ministry is also recommending that provincial and city governments cut their subsidies for EVs.

Why it’s important: Financial assistance for purchases has led to the rapid growth of China’s EV sector. However, this support has also led to concerns that manufacturers are too reliant on the government, which is holding them back from developing better technology and vehicles. The cuts have already had a negative impact on some smaller automakers. Shanghai-based Nio saw its share price fall by more than 5% following the announcement. The company previously said it would not reduce prices to offset lower subsidies, which means a higher price tag for prospective buyers.