China NEV 2021 Purchase Subsidy Scheme — Explanation
Author: EV Observer
Original source: https://xueqiu.com/6381881761/167339998
On December 31st, 2020, four government departments issued “Notice on Further Improvement of Financial Subsidy Policy for NEV Promotion” in which 2021 subsidy scheme was published.
Basically, 2021 policy is arranged according to 2020 published subsidy scheme — 2021 subsidy policy will be cut by 20% (10% for publicly used vehicles), while technical indices remain the same.
R=300–400 km EV PV will be subsidized with RMB 13K, R= above 400km EV PV with RMB 18K and PHEV (REEV included) with RMB 6.8K.
Since 2020 policy announced 2021 policy, the transition period is not introduced this time and the scheme is effective as of January 1st 2021.
Auto companies expected 20% drop and due to fierce competition it is expected that they will pay for the subsidy cut themselves, end price will not be increased.As for product management, auto OEMs will take responsibility for product quality as they must recall faulty products based on regulations’ requirements , otherwise they will face temporary or permanent ban from the list of models approved for sales and face suspension or cancellation of subsidies.
As for production capacity management, the departments require stronger management of investment projects and production approval, stricter control of expansion projects, optimization of existing capacities and strict enforcement of requirements for new and expansion production capacity projects.
As for NEV test cycle standard, 2021 is the year of shift into WLTC from NEDC. Before the new standard is implemented, products will be tested based on the old standard and as long as the product meets the required margins, it will be eligible for the subsidies. PHEVs (REEVs included) that are able to be tested under the new standard need to have EV mode range below 43 km.
Impact on the industry
Subsidy cuts is within expectations. The cut is not big, OEMs will probably pay for the cut themselves and will not increase guiding prices.
Subsidies are ever lower, which will make more OEMs start considering post-subsidy era. There will be more of R=300km vehicles.
Cut among public used vehicles is small and local governments are still allowed to subsidize public transport. Although the number of public used vehicles is limited, but subsidy intensity is strong and will favor commercial NEV manufacturers.
The scope of regulator authority is clearly reduced and following the OEMs will have to be more attentive of regulations on defective product recall.