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New energy car market share in China could enter 'free fall' after 2020: NPC deputy

The government has been reducing its subsidies for consumers of new energy cars and plans to cancel them all after 2020, but this could come with consequences, a deputy warns.

The market share of new energy cars in China could enter “free fall” after 2020 if the government cancels all subsidies to potential consumers of the cars, Chen Hong, SAIC Motor’s chairman and a deputy to the National People’s Congress from Shanghai said in a suggestion to the government.

In 2018, the number of new energy cars sold in China surpassed 1.2 million as China continues to lead the world in annual new energy car sales, but the sales are still largely policy-driven instead of market-driven, Chen said.

The Chinese government has been reducing its subsidies to consumers of new energy cars and plans to cancel all subsidies after 2020.

“The cost of batteries and the manufacturing of new energy cars will go down with technical progress, but we estimate that by 2020 the cost of those cars will still be higher than traditional cars,” Chen said.

The cost of a blade electric vehicle is 30,000 to 40,000 yuan (US$4,500 to 6,000) more than that of a comparable traditional car, while a plug-in hybrid electric vehicle is 20,000 to 30,000 more expensive in cost, he said.

“The cancellation of subsidies could reduce the market share of new energy cars in China by about 40 percent,” Chen said, warning that this could have consequences for China’s emission goals and strategies for its manufacturing sector.

To balance out the effect of ebbing subsidies for consumers and to achieve the goal of new energy cars reaching 40 percent of market share by 2030, Chen suggested that the government keep giving incentives to both manufacturers and consumers, especially in cutting taxes for consumers.

Chen cited OECD statistics from 2014 which showed that taxes for buying and keeping cars in China accounted for 40.5 percent of all taxes related to vehicles in China, while the percentage in the US, Japan, the UK and Germany was 35.3, 33.9, 25.2 and 16.7.

“The high tax burden in buying and keeping cars suppresses consumption, and in most developed countries, fuel consumption takes up a greater portion of taxes,” Chen said.

Also, in China, excises and vehicle and vessel taxes are classified solely on engine displacement and has not yet taken emission into account. Chen suggested that those taxes should be counted on the basis of emissions so as to encourage the use of more environment-friendly cars.

The government could also consider cutting income taxes for people who purchase new energy cars as such a measure has yielded positive results in the US, he said.

For manufacturers, Chen suggested that the government cut value-added taxes on the new energy car industry from 16 to under 10 percent, following countries like Norway, Iceland and Austria.

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