New Energy Vehicles: China cuts subsidies by half to boost competitiveness

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02:21

Your next car in China may cost you more than you think. China releases a new plan to cut subsidies on new-energy vehicles. Experts say the move helps make the sector more competitive. In the long term, it's good for the consumers. CGTN's Sun Tianyuan reports.

National subsidies on new energy vehicles will be cut by half.

Although it is long anticipated, Chinese car makers still feel the impact.

LIAN QINGFENG, SPOKESPERSON BAIC MOTOR NEW ENERGY VEHICLES "New energy vehicle enterprises are expected to face some pressure. But if an industry keeps relying on subsidies, it will never survive."

Over the past decade, the Chinese government has offered tens of billions of yuan to help foster the production of new energy vehicles and stimulate the market.

But some companies have become over-reliant. Professor Liu Chunsheng believes that the policy change came just in time.

PROF. LIU CHUNSHENG CENTRAL UNIVERSITY OF FINANCE & ECONOMICS "The essence of subsidies was to help the infant industry grow, not for companies to leech onto government aid. I think ten years is enough."

The subsidy for those with a driving range of 400 kilometers and above will be cut from 50,000 yuan or 7,500 US dollars to half.

The government also raised the bar to 250 kilometers to receive a subsidy.

Liu says the new plan will make room for more capable companies and drive out the sub-standard ones.

PROF. LIU CHUNSHENG CENTRAL UNIVERSITY OF FINANCE & ECONOMICS "The cut is inevitable that all companies must face directly. How they can upgrade quality and technology to stay competitive are the keys and they must. After all, the market is always about survival of the fittest."

Experts say it may affect car prices in the future. But many firms promised not to raise them for now.

They even offer incentives on the models to compensate for the cuts.

However, this is only temporary.

LIAN QINGFENG, SPOKESPERSON BAIC MOTOR NEW ENERGY VEHICLES "Cutting subsidies will force companies to fully limit costs and upgrade technologies, so the products can be good enough to offer a competitive price."

SUN TIANYUAN BEIJING "Experts say in the long term, it is beneficial to consumers. The government is now shifting aid from cars to charging poles and hydrogen stations. Better services and facilities will eventually encourage more purchases. Sun Tianyuan, CGTN, Beijing."