SHANGHAI/BEIJING (Reuters) – China has sent a clear signal that it is ready to end subsidies to its electric car industry after years of heavy government support fueled a boom that left the world’s second-largest economy with a huge oversupply and spurred it to push into global auto markets.
Top policymakers did not include electric vehicles in their list of strategic industries in their latest five-year development plan for 2026-2030. — the industry’s first exclusivity in more than a decade.
Analysts say the move is evidence that Beijing believes the industry has matured and no longer requires the same level of financial support, leaving its development to market forces.
But they say the inaction should not be seen as a sign that the electric car industry has fallen out of favor, despite it becoming a poster child for excessive competition that even President Xi Jinping has criticized. Instead, it reflects a strategic decision to allocate resources to other technologies where China is seeking to increase its capabilities, especially given global trade and security tensions.
MARKETS TO PLAY A BIGGER ROLE
“This is an official recognition that electric vehicles no longer need a priority policy. The subsidies for electric cars will disappear,” said Dan Wang, China director of Eurasia Group, a consultancy.
“China already dominates in EV-related technology and batteries, so it doesn’t make sense to prioritize it. It doesn’t mean the government will demand capacity cuts, but the market will play a bigger role in deciding what stays,” she said.
New energy vehicles (NEVs), a category that includes electric cars, plug-in hybrids and fuel cell vehicles, have been listed as strategic emerging industries in the past three five-year plans that have prompted Chinese authorities to invest billions of dollars to encourage automakers to build electric cars and consumers to buy them.
This support has led to a supply chain that China now controls with EV champions like BYD. In addition, China has become the world’s largest market for NEVs – by 2024. in July NEVs accounted for more than 50% of all car sales in China, more than 10 years ahead of policymakers’ original target.
But that rapid growth and support has also forced China to produce more cars than it can absorb as the industry struggles to meet production targets influenced by government policy rather than consumer demand, Reuters reported.
According to research company Jato Dynamics, 93 of the 169 car manufacturers operating in China have a market share of less than 0.1 percent.