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China in talks with automakers over EV subsidy extension sources


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SHANGHAI — China is in talks with automakers about extending expensive electric vehicle (EV) subsidies that would expire in 2022, aiming to grow a key market as the broader economy slows, said three people familiar with the matter. .

The move by policymakers comes as the world’s second-largest economy has slowed sharply — and with it car sales — after cities led by Shanghai imposed severe COVID-19 lockdowns from March. The curbs have closed stores, disrupted supply chains and cut spending, including on new homes.

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Government agencies, including the Ministry of Information and Industrial Technology (MIIT), are considering continuing subsidies to electric vehicle buyers through 2023, the people said, who declined to be named because the talks were private.

China’s expensive stimulus program has been credited with creating the world’s largest EV market. According to an estimate by Shi Ji, an auto analyst with China Merchants Bank International, about 100 billion yuan ($14.81 billion) has been distributed to buyers, including commercial fleet operators, since the subsidies began in 2009.

The terms of the extension until 2023, including the amount of the subsidies and which vehicles will be eligible, are not yet final, they said.

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Grants are available for cars made by all automakers, including non-Chinese players like EV giant Tesla O>, which has a factory in Shanghai and is the only foreign automaker with a best-selling EV.

The MIIT and the Treasury Department did not immediately respond to requests for comment on Wednesday.

The EV subsidy scheme was originally scheduled to be phased out at the end of 2020, but Beijing extended it for two years to boost demand in the wake of the COVID pandemic.

The government also reduced the amount of subsidies per vehicle over the years as demand increased and production costs fell. For example, the subsidy for a plug-in hybrid with a range of more than 300 kilometers was reduced by about 20% to the equivalent of about $1,900.

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EVS FOR $4,000

The incentive program to buy what China calls new energy vehicles (NEVs) has particularly boosted the purchase of cars with longer ranges, as it has raised the threshold for vehicles eligible for the subsidies over the years.

In China’s highly developed EV market, smaller, battery-powered city cars, most of which are ineligible for subsidies, make up 40% of EV sales, according to automotive consultancy JATO, and cost just under $4,000 on average. That compares to over $26,000 in the United States for comparable models.

Grants are now focused on larger models, with a range of more than 300 kilometers on a charge and a price of less than 300,000 yuan ($44,459).

Sales of NEVs in China rose 45% year-on-year in April, according to data from the China Association of Automobile Manufacturers. But that was a much slower pace than the previous month’s growth, when sales more than doubled from a year earlier.

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The association has forecast that production and demand in the coming weeks after the April trough caused by dozens of cities in China, will begin to catch up in full or partial COVID lockdown in the coming weeks.

Some local governments, including Guangdong and Chongqing, had also introduced incentives to subsidize consumers who trade in their old combustion-engine vehicles for new EVs in April.

In what would be a separate move, the state-run China Securities Journal reported on Tuesday that officials would introduce subsidies from June to encourage more buyers nationwide to buy cars, including NEVs, with payouts of up to 5,000 yuan ($740) per vehicle.

Shanghai’s municipal government is also considering how to boost spending after a drastic cut in car sales in China’s commercial and financial center in April. According to the Shanghai Automobile Sales Trade Association, not a single new car was sold in the city of 25 million during last month’s strict lockdown. ($1 = 6.7478 Chinese Yuan Renminbi)

(Reporting by Zhang Yan and Brenda Goh; editing by Kenneth Maxwell)

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