Chinese electric car sales fell 74 percent the month after subsidies were cut, according to data released by the country’s auto association.
Sales of Chinese plug-in hybrids and fuel-cell cars dropped 74 percent in January compared to the previous year, according to Bloomberg. China cut green car subsidies by 20 percent following several scandals, according to reports by the state-controlled Global Times.
The Chinese government has formally accused more than 20 car companies of illegally taking subsidies, but doesn’t give any formal reason for the subsidy cuts. China plans to replace some of the subsidies with a system of credits favoring what it calls new-energy vehicles (NEVs) over conventional combustion-powered cars. However, the country likely isn’t ready to make the switch.
“[M]ost of the NEV models are still in the process of development and secondly, the market has not developed that big demand for NEVs,” Robin Zhu, an auto analyst in Hong Kong, told Bloomberg. “It is not realistic to ask carmakers to suspend their sales of combustion vehicles so as to be compliant for the NEV quota.”
China may have doled out subsidies to fake companies as part of its plan to have five million electric or hybrid cars on the road by 2020. China issued stiff fines to five major car companies, including Nissan and Hyundai, which allegedly stole $150 million each year in subsidies.
The government’s crackdown began after a company called Suzhou Gemsea Coach Manufacturing Co. told the Chinese government it produced 3,700 electric vehicles last year and created almost every car the month before the government reduced subsidies.
State TV reporters and inspectors examined the company and found it was actually operating out of a shed and clearly had not produced that number of vehicles, according to state-run China Central Television. China ended up entirely revoking the production licenses of Suzhou Gemsea.
The Chinese government spent $4.5 billion on green car subsidies each year before the cuts to help increase the sales of electric and plug-in hybrid cars. The subsidies caused green car production to more than quadruple last year to 331,000 vehicles and were intended to help sell over 700,000 vehicles annually.
China has spent enormous amounts of money attempting to go green, much of which was either wasted or misused, according to the government. The country spent more than $80 billion building new green energy in 2014 alone, while the U.S. spent a “mere” $34 billion.
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