Two local-level governments in China have revived subsidies for electric vehicle purchases, a bid to stimulate auto sales already in a slump which is deepening with the novel coronavirus outbreak.

Why it matters: The latest move by the city of Guangzhou and Hunan province in central China could spur other localities to release similar measures aimed at stimulating EV consumption and helping the market to regain its footing.

  • The subsidy resuscitation comes after Chinese president Xi Jinping urged local governments in early February to stabilize consumption including automobile purchases, a speech which was later published in a government periodical.

Details: Guangzhou, the capital of the southern China’s Guangdong province, will offer electric car buyers RMB 10,000 ($1,440) per unit incentives for 10 months starting March, the city government said on Wednesday in a document (in Chinese). The officials did not provide further details.

  • Currently, Chinese EV buyers receive a subsidy of up to RMB 25,000 from the central government. Beijing halved the subsidies in June from a maximum RMB 50,000 for EVs with a range of more than 400 kilometers (around 250 miles).
  • Local governments also scrapped subsidies in June that had been in place since 2016, rebates limited to 50% of the amount subsidized by the central government.
  • In February, the government of Foshan, a city neighboring Guangzhou, announced that it would provide incentives of RMB 2,000 for new car purchases and another RMB 1,000 for each trade-in deal.
  • Guangdong is the country’s biggest provincial economy and has a massive auto manufacturing base which produced more than 3.1 million units last year, 12% of the country’s total volume, according to figures from the National Bureau of Statistics.
  • Central China’s Hunan province followed the suit with plans to reintroduce subsidies for first-time EV buyers to shore up domestic spending, alongside supportive measures to build charging infrastructure, Chinese media reported on Wednesday citing an official who has not revealed additional details.
  • Analysts at China’s Citic Securities expect more localities which are relatively wealthy and have a strong auto industry presence, such as Zhejiang province and Shanghai, will soon deploy policy tools including EV incentives to boost consumption.

Context: China’s January sales of new energy vehicles (NEVs) plunged by more than half from a year earlier to 44,000 units. China recorded an annual decline in NEV sales for the first time last year to 1.2 million units, falling 4% from the previous year.

  • Beijing initially planned to completely remove EV subsidies after 2020, but later gave automakers confidence by saying there would be no more significant reductions in NEV subsidies this year.
  • After rocketing growth for nearly three decades, China auto sales fell 2.8% year on year to 27.8 million units in 2018. The market further shrank by 8.2% last year.

Jill Shen is Shanghai-based technology reporter. She covers Chinese mobility, autonomous vehicles, and electric vehicles. Connect with her via e-mail: jill.shen@technode.com

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