China backslides on electric car quotas while extending subsidies

China is poised to temporarily ease its quotas for EV production, according to Reuters. The reason cited for the backsliding is to give automakers a chance to recover from slumping sales due to the coronavirus pandemic. The move would follow the United States relaxing its vehicle emission rules. However, unlike the US, China plans to extend its electric-vehicle subsidies for two years.

Xin Guobin, vice industry minister, said on Monday:

[China would] make adjustments on new energy vehicles and related policies to further promote the coordinated and healthy development of the automotive industry.

The plan for how the EV quotas will be rolled back is not yet final. Officials at industry and environment ministries, as well as automakers, are discussing the details.

Regarding China, an inside source told Reuters:

Policymakers acknowledged that automakers are strained to promote electric models when overall demand is slowing. They want the auto industry to recover steadily this year.

The easing of NEV quotas for an uncertain length of time will allow car companies to delay new model launches.

Keep in mind that the change in policy relates specifically to EV quotas, not subsidies. China said late on Tuesday that it will extend subsidies for EV purchases and extend their purchase tax exemption for two years to help its auto industry to recover.

China’s Ministry of Industry and Information Technology in December signaled a shift in policy away from subsidies while implementing quotas. In its 15-year EV draft plan, Beijing set a target for EVs to account for 25% of annual new light-vehicle sales by 2025.

China had planned to continue phasing out consumer incentives this year, which are now likely to extend for two years.

In December, Congress had considered extending EV tax credits that would have primarily helped buyers of Tesla and GM electric vehicles. But that plan was quashed by the Trump administration.

Electrek’s Take

The coronavirus pandemic is wreaking havoc with the global economy, giving an excuse to world leaders to undermine rules to protect citizens from the worst effects of tailpipe emissions. China’s policies are hard to read. It’s uncertain how its move to delay quotas but extend subsidies will affect near-term EV sales in the world’s largest auto market.

Europe is holding firm. The European Automobile Manufacturers’ Association (ACEA) sent a letter to the European Commission last week asked to delay the EU’s CO2 targets. However, the commission will continue on its course. In February, EV sales were up by 92%, while the overall auto market fell by 7%.

Similarly, California (and so-called ZEV states) are also holding the line, despite challenges from Washington.

Meanwhile, the Trump administration stands alone in its blatant anti-environment and anti-EV attacks after yesterday’s outrageous rollback of fuel efficiency standards. The move also threatens the long-term health of the legacy US auto industry, as the EV industry grows in other global markets while leaving the US behind with outdated technology and gas-guzzling, pollution-spewing vehicles.