BEIJING (Reuters) - China will cut subsidies on new energy vehicles (NEV) by 10% this year, the finance ministry said on Thursday, providing continued support for the country's green car push.
China has set an ambitious goal for NEVs to account for a fifth of auto sales by 2025 compared with the current 5%, as it seeks to reduce pollution and cultivate home-grown champions.
Under the plan, China would extend subsidies for NEV purchases to 2022, rather than ending them by the end of this year and extend their purchase tax exemption for two years. The government had announced plans in 2015 to end the subsidies this year, but earlier this year said it would extend them.
China will in principle cut subsidies by 20% in 2021 and 30% in 2022, the finance ministry said in a statement. But it will not cut subsidies on qualified new energy commercial vehicles earmarked for public purposes this year.
China is the world's biggest car marker where more than 25 million vehicles, including 1.2 million NEVs, were sold last year.
China will raise the requirements for the driving range and power efficiency of cars that qualify for the subsidies, the statement said. It also said the authorities would support the sales of cars with swappable batteries, a technology that has been pursued by Chinese electric vehicle makers Nio Inc and BAIC BluePark.
Subsidies will apply only to passenger cars cheaper than 300,000 yuan ($42,376.47), it said. This price is lower than starting price of Tesla (NASDAQ:TSLA) Inc's China-made Model 3 sedans before they receive subsidies.
China also said authorities would give priority to the purchase of new energy vehicles for government use but did not give further details.
The new policy is effective from April 23. NEVs include battery-powered electric, plug-in hybrid and hydrogen fuel-cell vehicles.
"This extending of subsidies will give the industry long term support but is unlikely to impact short term sales much," Cui Dongshu, secretary general at China Passenger Car Association (CPCA).
Global automakers including Volkswagen (DE:VOWG_p), General Motors (NYSE:GM) and Toyota are ramping up electric vehicle production in China to meet stricter government regulations.
Sales of NEVs contracted for a ninth month in a row in March and were down over 50% from a year earlier, according to data from the China Association of Automobile Manufacturers (CAAM).