China will cap subsidies and increase technical requirements for green energy vehicles starting next year in the wake of a subsidy cheating scandal, according to documents posted on the Ministry of Finance website on Thursday.
The measures include a new formula for calculating central government subsidies and subsidy caps for electric and plug-in hybrid coach buses, with a maximum subsidy of 300,000 yuan ($43,000) per vehicle, roughly half of the previously listed highest subsidy of 600,000 yuan.
Local subsidies are also capped at 50 percent of those awarded by the central government under the new policy, which goes into effect Jan. 1.
China has spent heavily on green vehicle subsidies, spending $4.5 billion last year alone, to encourage its automotive industry to leap frog ahead of global competitors in electric vehicle technology and combat heavy pollution in much of the country. The programme helped quadruple sales of electric and plug-in hybrid cars in 2015 and fuelled a 60 percent jump this year.
Prominent manufacturers of plug-in hybrid and electric vehicles in China include BAIC Motor Corp Ltd and BYD Co Ltd, with Germany's BMW also making a significant number.
In September, the Ministry of Finance uncovered widespread cheating of the programme, from fabricating production and sales to not meeting technical requirements, with fraud prevalent among bus makers.
The government and state media have named at least 25 companies that cheated the programme.Also read: China's Green Car Subsidy Scandal: 20 More Car Makers Named Including Nissan and Hyundai
The government has long planned to wean automakers off of subsidies starting from 2017, with car makers and parts suppliers anticipating increased market pressures from the rollback.
"Since the subsidies are being reduced from next year, the market (for batteries) is very price sensitive," Neill Yang, marketing director for Contemporary Amperex Technology Ltd (CATL), China's second-largest maker of lithium-ion automotive batteries, said earlier this month.
The latest policy introduces a new system for calculating coach bus subsidies based on the energy density, charging speed and, for plug-in hybrids, fuel efficiency.
Unlike the previous policy, fast-charging coach buses will receive roughly two-thirds more in subsidies than those that charge at normal speeds.
For lorries and specialized-use vehicles, central subsidies will be capped at 150,000 yuan.
For passenger cars, the policy delivered on earlier promises to roll back subsidies for electric and plug-in hybrids starting with a 20 percent reduction in 2017.
New technical requirements varying by vehicle type include minimum energy density and range requirements.
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