China reduces electric car subsidies

China has announced its plans to reduce subsidies for electric cars sold in the country, as has been expected for some time.

China’s Ministry of Finance announced the changes in a statement on its website, with Bloomberg noting “the subsidy for pure battery electric cars with a driving range of 400 kilometers (250 miles) and above will be cut by half, to 25,000 yuan ($3,700) per vehicle from 50,000 yuan.” Electric cars must now have a range of at least 250 miles to qualify for any subsidy.

China hopes the move will encourage innovation and improved technology to sell EVs. The ministry’s translated statement policy lists a number of goals for “high-quality development” of new energy vehicles, beyond reducing subsidies. There will be also be a “transition period” starting today and running for the next three months regarding local government subsidies. After that period, those subsidies should be removed from electric car purchases and instead applied to infrastructure.

Electric vehicle sales in China were soaring at the start of 2019 as total car sales in the country dipped. Much of the upswing was due to the expectation that China would soon announce new subsidy plans, so customers wanted to get in while the getting was good.

About a year ago, China updated its EV incentive policies to favor longer-range vehicles. The country is still favoring long-range electric vehicles, in a way — by still offering any subsidies at all.

Still In Motion

These subsidy cuts come as Tesla cranks up construction on its Gigafactory 3. Tesla hopes to complete that building by summer, and aims to produce 3,000 Model 3 vehicles there by the end of 2019. BYD also recently broke ground on a new battery gigafactory in the country.

The Ministry of Finance also announced new electric bus subsidy standards and technical requirements. Electric buses have been a huge success in China. About 99 percent of the world’s electric buses are believed to be in China. The entire city of Shenzhen electrified its entire bus fleet by the end of 2017.