China has decided to cut subsidies for new energy vehicles (NEVs) by 10% this year, following its decision to continue providing incentives to customers for buying cleaner cars, Reuters reported. The Chinese government had initially announced plans to end the subsidies this year, however it then announced in March that the subsidies would be extended.

The country has aimed for NEVs – a description which includes plug-in hybrids and hydrogen fuel cell vehicles – to account for 20% of new vehicle sales by 2025, compared to 5% currently, as it aims to reduce pollution and grow local automotive sector players, the report said. The latest plan will extend subsidies for purchases of NEVs until 2022, and tax exemptions for two years.

The subsidies will, however, only apply to passenger vehicles that are priced below 300,000 yuan (RM184,823). which is likely to exclude products from premium makes such as BMW and Mercedes-Benz, it said. The made-in-China Tesla Model 3 is currently priced at 323,800 yuan (RM199,508), which means that the American electric vehicle manufacturer will have to reduce prices beneath the threshold to qualify.

In principle, China will reduce subsidies by 20% next year and by 30% in 2022, the country’s finance ministry said, though subsidies for commercial NEVs for public purposes will not be reduced this year, according to the report. The government of China will also raise the requirements for a vehicle’s driving range and efficiency in order to qualify for the subsidies.

Additionally, the authorities will support the sale of vehicles with swappable batteries, an innovation that has been pursued by Nio and BAIC BluePark, the Reuters report said. New energy vehicles will also be prioritised when fleets are being sourced for government use, it said.