China's electric vehicle subsidies sidestep Tesla's Model 3

Update: Tesla just dropped the price of the Model 3 in order to qualify for the subsidies.

China recently announced a modest cut to its subsidies on new energy vehicles (NEVs), a move that was widely expected. At the same time, the authorities changed the rules to exclude higher-priced vehicles, apparently making Tesla’s Model 3 ineligible for the subsidies.

Twitter: Jay in Shanghai

It’s been something of a rollercoaster ride for the subsidies of late. In 2015, the government announced plans to end the subsidies this year. In January, it said there would be “no significant cuts” this year. In March it confirmed they would be extended, but warned of a possible reduction.

Under the new plan, purchase subsidies for NEVs, which include PHEVs and fuel cell vehicles, will drop 10% this year, 20% in 2021, and 30% in 2022. Tax exemptions on purchases will be extended for two years. Subsidies on commercial NEVs for public purposes will not be reduced this year.

The details of the plan appear to have created some winners and losers. The authorities plan to support the sale of cars with swappable batteries, a technology that Chinese EV-makers Nio and BAIC BluePark have pursued.

The government has tightened requirements for the driving range, power efficiency and sales prices of cars that qualify for the subsidies. Only passenger cars costing less than 300,000 yuan ($42,376) will be eligible. That excludes some higher-priced EVs sold by BMW and Daimler. It also edges out Tesla’s China-made Model 3, which is currently priced at 323,800 yuan before subsidies. Will Tesla reduce the price in order to let buyers benefit from the subsidies?

Sales of NEVs contracted for the 9th month in a row in March, and were down over 50% from a year earlier, according to the China Association of Automobile Manufacturers.

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This article originally appeared in Charged. Author: Charles Morris. Source: Reuters