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China Helps Tesla While Cutting Down on EV Incentives

China’s Ministry of Finance has finally announced its plans to reduce electric car subsidies for vehicles sold in the country.

In order to encourage local manufacturers to pursue innovation rather than government assistance as a means of stimulating sales, China will reduce the subsidy by half for all-electric vehicles with a driving range of 400 kilometers (250 miles) and above, from 50,000 yen to 25,000 yuan ($3,700) per vehicle.  The government has also warned of plans to eventually phase out such subsidies by 2020, though there aren’t many details as of yet.

EV sales in China have been soaring since the start of 2019 even while total car sales in the entire country waned.  It is expected that much of the upswing was at least in part to the anticipation of these new subsidy plans, so consumers with an eye towards making a purchase in the near future were buying vehicles while the full subsidy was still in effect.

Subsidy Guidelines are Great News for Tesla

In order to qualify for any subsidy, EVs need to have a range of at least 250 kilometers (approximately 155 miles), rather than 150 kilometers as required previously.  This means that every Tesla electric car will be eligible for the subsidy, allowing the company to remain a selling power in the EV market in China.  Very few EV manufacturers can boast such a range across their entire selection of models.  

China and the EV Market

China is making large strides towards becoming the future of electric vehicles.  In 2018, more electric cars were sold in China than in the rest of the world combined. In fact, in the last decade the Chinese government has spent nearly $60 billion to create an industry that builds electric cars while also reducing the number of licenses available for gasoline-powered cars.  Today China is the home of over 100 EV manufacturers, along with hundreds of supplemental companies that provide components for these vehicles and their batteries.  Electric buses are also the norm in China, and it currently makes 99% of the world’s electric buses.  In such an EV-friendly environment, automakers both domestic and foreign stand a chance of substantial growth within a culture that’s eager to obtain their wares. 

The Chinese government’s top economic-policy agency also set a goal in 2018 to have half of the new cars on China’s roads be partially or fully autonomous by the end of 2020. It’s an ambitious goal, to be sure, but if done right, a large fleet of fully autonomous electric cars could be one of the most resource-efficient transport systems of the modern world.

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