SHANGHAI — China is in talks with automakers about extending costly subsidies for electric vehicles (EV) that were set to expire in 2022, aiming to keep a key market growing as the broader economy slows, three people familiar with the matter said.
The move by policymakers comes as the world’s second-biggest economy has slowed sharply – and auto sales along with it – after cities led by Shanghai imposed tight COVID-19 lockdowns from March. The curbs have shut stores, disrupted supply chains and slashed spending, including on new homes.
Government departments including the Ministry of Information and Industrial Technology (MIIT) are considering a continuation of subsidies to EV buyers in 2023, said the people, who declined to be named as the discussions were private.
China’s expensive incentive program has been credited with creating the world’s largest EV market. Since the subsidies began in 2009, some 100 billion yuan ($14.8 billion) has been handed out to buyers including commercial fleet operators up to end-2021, according to an estimate by Shi Ji, an auto analyst with China Merchants Bank International.
The full terms of the 2023 extension, including the amount of the subsidies and which vehicles would qualify for them, have not been finalized, the people with knowledge of the matter said.
One specific measure under review would roll back a planned purchase tax increase for qualified electric and partly electric vehicles, two people briefed on the discussions told Reuters.
For this year, there is no purchase tax for such vehicles, but the government had planned to raise the tax to 10% of the purchase price in 2023. Instead, the rate would be raised to just 5%, they said.
Subsidies have been available for cars made by all automakers including non-Chinese players like EV giant Tesla, which has a factory in Shanghai and is the only foreign automaker with a top-selling EV.
The MIIT and Ministry of Finance didn’t immediately respond to requests…