It was recently announced by the Ministry of Industry and Information Technology that the Chinese Government will completely annul its subsidies for new-energy vehicles (NEV) by the end of 2020.
Recent years have seen subsidies greatly boost China's NEV production. By 2017, China had produced over 808,000 NEVs. China has ranked number one in the world in terms of NEV production and sales for several consecutive years. However, subsidies make auto companies addicted to such favorable policies.
Huge subsidies have lured a large number of investors to rush to invest in the NEV industry. There are around 300 NEV manufacturers in China, with nearly 5,000 types of NEVs appearing in the market or undergoing research and development. Some manufacturers even lack the qualifications to produce NEVs, and some that used to produce farm vehicles also rushed to transform themselves into NEV plants. The situation actually is hindering market order and the sustainable development of China's NEV sector.
Many NEV manufacturers seldom spend money on quality improvement, so their products fail to meet public demand in terms of performance, safety and design. Thus, more NEVs are produced than are needed in the market, resulting in a huge surplus.
The development of NEVs needs support from the government, but it can't count on subsidies for ever. Abolishing subsidies for NEVs will curb irrational investment and eliminate those incapable of operating this business properly, which in turn will help to forge bright prospects for China's NEV industry.