Long-term growth remains intact

In fact, according to the original policy concept, subsidies for new energy vehicles should be withdrawn in 2020. However, at that time, China's car market was in decline due to multiple factors including the COVID-19 pandemic. In order to boost market consumption, the Ministry of Finance and other four ministries issued the Notice on Improving fiscal Subsidy Policies for the Promotion and Application of New Energy Vehicles in April 2020, proposing the intensity and pace of gradual decline and extending the implementation period of subsidy policies to the end of 2022.

In 2021, in the face of the global epidemic spread, chip shortage and other adverse effects, the new energy vehicle industry still achieved a substantial growth. From January to November, the production and sales volume respectively reached 3.023 million and 2.99 million, with a year-on-year growth of 1.7 times. In November, the market penetration rate of new energy passenger vehicles reached 19.5%. New energy vehicles have entered a new stage of explosive growth, and have shifted from policy-driven to market-driven. This has created a favorable environment for the orderly withdrawal of subsidy policies.

The circular makes it clear that in 2022, the subsidy policy will maintain the same threshold of technical indicators such as power battery system energy density, driving range and energy consumption, so as to stabilize enterprise expectations. The subsidy standard for pure electric passenger cars with a range of 300 km to 400 km will be reduced from 13,000 yuan in 2021 to 9,100 yuan, a decrease of 3,900 yuan. The subsidy standard for pure electric passenger cars with a range of more than 400 kilometers will be 12,600 yuan, down 5,400 yuan from 18,000 yuan last year.

Some car companies immediately through price rises or time-limited pricing strategies to cope with the pressure of subsidy withdrawal. Insiders believe that short-term price fluctuations have an impact on consumer buying behavior, but the industry has a consensus on the withdrawal of subsidy policies, which will not inhibit the long-term development of the industry. China Automobile Association predicted that this year, China's new energy vehicles will continue to maintain rapid growth, annual sales are expected to break through 5 million vehicles, a year-on-year growth of 47%.

Subsidies have created the world's largest market

Subsidies for new energy vehicles date back to the industry's beginnings. In 2009, in order to support emerging industries, the central finance subsidized the promotion and application of new energy vehicles.

According to statistics, the Ministry of Industry and Information Technology (MIIT) has released a number of batches of subsidy funds for the promotion and application of new energy vehicles. From 2009 to 2020, the central government has invested more than 120 billion yuan in subsidy funds. In addition to years of local financial subsidies, infrastructure subsidies for charging and changing electricity, China's subsidies on the new energy vehicle industry amount to hundreds of billions of yuan.

In the past 12 years, the annual sales volume of new energy vehicles has increased 262 times, from 5,209 units in 2009 to 1,367,000 units in 2020. China has thus become the world's largest market for new energy vehicles, with production and sales ranking first in the world for seven consecutive years.

During this period, in order to support the healthy development of the industry and improve the core competitiveness, China's new energy vehicle subsidies have raised the entry threshold, requiring non-private users to buy new energy vehicles with a cumulative mileage of more than 30,000 kilometers, while the key performance indicators of the product also tilt toward high-tech and high endurance direction.

Under the guidance of the policy, the driving range of China's mainstream new energy vehicles has been increased to 500 kilometers. At the same time, China has built the world's most complete industrial chain of new energy vehicles, and the industrial scale and technological level of key components are at the forefront of the world. In particular, the battery energy density has increased exponentially and the cost has decreased year after year, ensuring the continuous breakthrough of China's new energy vehicles.

The development of new energy vehicles has been deeply rooted in people's hearts

Although subsidies recede, the policy's determination to support new energy vehicles has not changed. A series of top-level designs at the national level, such as "Carbon Peak Action Plan by 2030", "New Energy Vehicle Industry Development Plan (2021-2035)" and "Notice on the Launch of fuel cell Vehicles Demonstration application", have clarified that new energy vehicles are the future development direction.

In particular, the parallel Management Method of Average Fuel Consumption of Passenger Vehicle Enterprises and New energy Vehicle Credits, commonly known as the "double Credits" policy, has been tried out for nearly four years and is considered to be the "successor" after the withdrawal of subsidies. According to this policy, in addition to reducing fuel consumption to earn positive fuel consumption credits, automakers must also sell enough new energy vehicles to earn the corresponding new energy credits. The move is intended to subsidize new energy vehicles through fuel cars and optimize the structure of the automobile industry by market means.

Beyond the national level, many places have included new energy vehicles in their urban development plans. For example, recently issued by Guangzhou city "intelligent and new energy vehicle innovation and development of the" 14th Five-year plan "proposed, research and release of new energy vehicles to promote the application of licensing, charging and high-speed traffic preferential policies and measures, actively promote the relevant fields to achieve large-scale, commercial application of new energy vehicles. By 2025, the penetration rate of new energy vehicles in Guangzhou will exceed 50%, and the number of vehicles will increase to 800,000.

A number of people pointed out that the development of new energy vehicles has been deeply rooted in the hearts of people. New energy vehicles still enjoy preferential policies in investment access design, tax incentives, unlimited purchase restrictions and other aspects, and the focus of policy support will be further shifted from the purchase end to the use end. Reducing the cost of car purchase, improving consumer experience and improving battery recycling will be the focus of the industry in the future.