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Affected by COVID-19 's epidemic, China's auto market has been in the doldrums since the New year. In order to promote automobile consumption, the State Council identified three latest stimulus measures at its executive meeting on March 31, including the extension of subsidies for the purchase of new energy vehicles and exemption from purchase tax for two years. However, less than two days after the new policy was introduced, Bloomberg posted that China was considering reducing subsidies to car buyers.

Although the recent overseas media reports on China's automobile policy are not accurate, after Bloomberg released a news titled "China is considering extending the subsidy for electric vehicles after sales plummeted" in early February, it attracted the attention of China's new energy automobile industry, and China also formally introduced the policy half a month later.

Several Chinese government agencies are discussing cutting subsidies for new energy vehicles by 10% later in 2020 and limiting the number of qualified models that receive subsidies, according to Bloomberg, citing people familiar with the matter.

The Ministry of Finance, the Ministry of Industry and Information Technology and the National Development and Reform Commission did not comment on the Bloomberg report.

According to the report, there are three main points to discuss the changes in electric car subsidies: first, electric car subsidies will be reduced by 10% in the second half of this year; second, the discount is limited to locally made vehicles with a price of 300000 yuan ($42300) or less. For more than 300000 models, if they support power replacement, they will not be subject to price restrictions and will also enjoy subsidies, such as Xilai cars; third, the starting range will be raised from 250km to 300km, and the subsidy threshold will be further raised.

It is understood that when China started in 2009, the production of new energy vehicles was less than 300. In order to promote the development of new energy vehicles, the Chinese government began to provide financial subsidies to new energy vehicles in 2010. By 2015, China has become the world's largest market for new energy vehicles. To this end, China will plan to gradually reduce subsidies for new energy vehicles in order to achieve the "healthy" development of domestic new energy vehicles.

However, due to the development of domestic new energy vehicles is still not up to expectations, with the decline of domestic new energy vehicle subsidies, resulting in a rapid decline in domestic new energy vehicles. Data show that sales of new energy vehicles fell 4.0 per cent year-on-year to 1.206 million in 2019, the first negative growth in China's promotion of new energy vehicles in a decade.

Until the beginning of 2020, with the outbreak of the domestic COVID-19 epidemic and the entry of strong foreign new energy vehicle brands such as Tesla, the domestic independent new energy vehicles were hit, and the overall market declined again. Among them, the production and sales of new energy vehicles completed 9951 and 12908 respectively in February, down 82.9% and 75.2% respectively compared with the same period last year, while the Tesla brand bucked the trend.

In response, Minister of Industry and Information Technology Miao Wei said at a press conference of the Information Office of the State Council in January this year that the Ministry of Industry and Information Technology is working with relevant departments to study policies and measures to promote automobile consumption, and to further study and evaluate the policy of subsidies for new energy vehicles, and the policy of slope decline in 2020 may be more gentle. On March 31, Premier Li Keqiang presided over an executive meeting of the State Council to extend the policy of subsidies for the purchase of new energy vehicles and exemption from purchase tax for two years in order to promote automobile consumption.

Some netizens believe that the reason why the subsidy is set at 300000 yuan may be because foreign brands such as domestic Tesla Model 3 are positioned at more than 300000, which not only reduces the desire of some consumers for foreign brands, realizes the internal competition of independent brands, and helps the effective development of domestic new energy vehicles. At the same time, for example, some of the domestic new energy car companies that support power change have also received certain "national" support.

In fact, 300000 is the common limit for luxury cars in the industry, such as the quarterly ranking of car models by the Federation of passengers. And this is also through the per capita income statistics, so through this line will be more effective test of the universality of the policy. Of course, with the gradual increase of the threshold of new energy vehicles, it will also be more beneficial to the development of domestic new energy vehicles, such as raising the threshold of 250km to 300km.

In any case, the development of new energy vehicles is still the major trend of the automobile industry in the future, and promoting the development of new energy vehicles will also be the unswerving direction of China. However, as more and more multinational car companies accelerate the layout of new energy vehicles, independent brands that already lag behind major multinational car companies need more support. In order to become a leader in the new energy vehicle industry, the state has maintained an important subsidy policy over the past decade, but before new energy vehicles become mainstream models, new energy vehicles will experience all kinds of suspicions. The country will also help independent car companies to achieve reasonable and healthy development.

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