China slashes EV subsidies, electric automaker shares fall!

China slashes EV subsidies, electric automaker shares fall (Charged EVs)

• China has announced substantial cuts to EV subsidies, with the highest level subsidy being cut by 50% (to USD3,700) and the minimum range requirement increased form 150km to 250km.
• The government had announced it would reduce subsidies this year and phase them out after 2020 due to concerns of innovation being held back by automakers reliance on subsidies.
• However, as the finance ministry has also called for local cities and provinces to remove subsidies on EVs (incl. trucks and buses), the total reduction amounts to c. 67% compared to the 40-50% the market was expecting.

Analysis & Comments

• Such a cut was expected, with considerable press speculation.
• China has been saying for a long time that by 2020 they will phase out all subsidies on EVs – a 50% reduction in federal subsidies in 2019 should therefore have been expected by the industry, if not the market (although the local authority impact may not have been totally priced in).
• The Chinese have already developed the scale in battery manufacturing to effectively compete in EVs without subsidies. Over the next 5 years this scale will further dramatically increase. Subsidy removal will only result in consolidation in cell manufacturers in China.
• There should not be any significant slowdown in EV adoption in China in the long term but there could be short term dip in growth. Charging infrastructure development is far more important than either subsidies and battery costs. This are the areas where most of the investment will likely be made by utilities, oil & gas majors, and auto OEMs.