China In Talks With EV Manufacturers To Extend EV Subsidies Beyond 2022: Report

Zinger Key Points
  • China could extend EV subsidies that were set to expire by end-2022
  • EV makers are on struggling due to a combination of macroeconomic challenges and geopolitical tensions

Chinese electric vehicle manufacturers that bore the brunt of the domestic COVID-19 lockdowns could be in for a reprieve.

What Happened: With the looming expiration of EV subsidies, China's policymakers have initiated discussions with domestic manufacturers regarding the extension of the program, Reuters reported, citing people familiar with the matter.

Government departments, including the Ministry of Information and Industrial Technology, are toying with the idea of extending the subsidy to the end of 2023, the report added. The terms of extension, including the subsidy amount and the qualification criteria for the subsidies, have not been finalized yet.

Additionally, the report suggested the government has decided not to implement an increase in the purchase tax for qualified EV and partly-electric vehicles from 5% to 10% in 2023.

An extension should come as a much-needed relief for EV manufacturers, which are facing the double-whammy of production disruptions and demand destruction amid the resurgence of COVID-19 in the country. Production of most companies nosedived in April as they faced, supply, production and logistical challenges.

Related Link: Nio Surges As Singapore Listing Announced For May 20: What Investors Should Know

Why It's Important: The subsidies were introduced in 2019 to spur sales of green energy vehicles. After initially planning to end subsidies by the end of 2020, the government decided to extend the program by two years to the end of 2022. Along with the extension announced in 2020, the government also brought about amendments, including limiting the subsidies to 2 million new energy vehicles per year and a vehicle price ceiling of 300,000 yuan ($44,490).

Despite most of Nio, Inc.'s NIO EVs priced above the ceiling, it continued to benefit from subsidies, given the government's decision to give exemption to companies adopting battery-swap technology.

In premarket trading Wednesday, Nio stock was slipping 1.02% to $16.46, according to Benzinga Pro data. XPeng was moving down 0.50% to $23.83, while Li Auto was edging up 0.25% to $23.80.

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