Better policies will help to advance technology: experts
New upcoming policies for new-energy vehicles (NEV) are likely to help the industry grow and phase out less competitive manufacturers, analysts told the Global Times on Monday, following an official's comment on reducing NEV subsidies.
There were mixed reactions after an official from the Ministry of Finance (MOF) said the government is mulling to tighten the already receding subsidy scheme on the country's NEV makers at an industry forum on Sunday.
Song Qiuling, an official with the MOF, said that the ministry will, together with the Ministry of Industry and Information Technology, raise the threshold that determines which car makers are eligible for the central government's subsidy, according to domestic news portal caixin.com.
Song made the remarks at the China EV100 Summer Forum 2016, which was held in Zhengzhou, capital of Central China's Henan Province, on Sunday.
Song said that a non-discriminating subsidy system would cause companies to be subsidy-dependent and that the catalogue of recommended companies and NEV models would be trimmed in the future. Models with low technology or that lack market recognition will not receive subsidies.
In April 2015, China said it would gradually reduce subsidies for NEVs from 2016 to 2020 and pursue market-based policies to support the development of the sector, according to chinanews.com.
Treating the NEV sector as a strategic emerging industry, China's central government allocated a total of 28.44 billion yuan ($4.2 billion) in subsidies to NEV producers from 2013 to 2015, according to the Caixin report.
During the same period, NEV subsidies from local governments totaled over 20 billion yuan.
In 2015, the number of NEVs produced and sold in the Chinese mainland market approached 350,000 from 5,000 in 2009.
Industry problems
Rapid development has caused the industry to be decentralized and roiled with problems, including a technological gap with advanced players in foreign countries and a lack in research and development funding, according to a July report by the China Quality Daily that cites an industry report.
Some localities and companies lack the industrial strength to develop NEVs and batteries, but are obsessed with building up new capacities, the report said.
Out of the 4,000 new-energy models that received production permits from authorities, only a quarter of them actually went into production. Further, only 140 out of 200 NEV producers saw their models enter the market, the report said.
"This new adjustment will greatly reduce cheating for subsidies and provide more funds to companies with advanced technologies," Feng Shiming, a senior industry analyst with Shanghai-based Menutor Consulting, told the Global Times on Monday.
Many companies steal subsidies through faking their sales reports, which impacts development in the whole industry, Feng said.
Feng suggested that subsidies also need to be provided for lithium battery manufacturers to support the research and development of key components. Meanwhile, funds should be provided for charging facilities and consumers to boost the expansion of NEVs.
Wu Shuocheng, a Shanghai-based independent industry analyst, echoed Feng's view, saying that subsidy adjustment would encourage NEV makers to enhance their technologies.
Wu said that the NEV industry in China is in the start-up stage, which is hungry for favorable policies.
Impact on R&D
A staff member at Beijing Hyundai Motor Co surnamed Fan told the Global Times on Monday that the company "may put less effort on research and development if subsidies are reduced."
Although subsidies cover 40 percent of the cost of NEVs, [Hyundai] struggles to make a profit because the cost of production is high and some consumers do not want to buy new energy cars due to potential risks, Fan explained.
The cost of NEVs manufactured by Beijing Hyundai is more than 200,000 yuan, he said.
The company has sold less than 1,000 NEVs since entering the market in June 2016, Fan said.
According to Feng, NEVs shouldn't be considered any less safe considering the low ratio of accidents. "But domestic NEV manufacturers should ensure a high safety standard in their products," he noted.
Additionally, problems with self-ignition and poor endurance of batteries have created a bottleneck for the NEV industry, Fan said, noting that the vehicles have promise but that more funds are needed for research and development.
