Analysis – China Signals will pull the plug on EVS funding with a five-pronged plan

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Analysis – China Signals will pull the plug on EVS funding with a five-pronged plan

Shanghai/Beijing (Reuters) – China has sent a clear signal that it is willing to pull the plug on subsidizing the giant electric car industry after years of a cheap boom, fueling a push in global auto markets.

The top financial members have left electric vehicles out of their list of industries based on their newly developed five-year plan for 2026-2030, the first release of the industry in more than a decade.

Analysts say the move is evidence Beijing is looking at the industry to mature and whether it still needs the same level of financial support, leaving its growth up to the market.

But they say what is being said should not be seen as a sign that the EV industry has been embraced, even though it is becoming the poster child for excessive competition that has been criticized even by President Xi Jinping. Instead, it reflects a strategic decision to allocate other resources to technology where China wants to improve its capabilities, especially in the light of global trade and security.

It’s a huge role playing market

“It is an official recognition that electric vehicles no longer need policies to be implemented in the future. The electric vehicle indicators will end,” said Dani Wang, director of China Consulting at EuculAsia Group.

“China is already sitting on technology related to tech and batteries so there is no point to prioritize. It means that the government will need to be cut, but the market will play a big role in deciding who survives,” he said.

New energy vehicles (NEVS) – A category that includes EVS, plug-in hybrids, and hybrid vehicles – have been included as emerging industries in the last five strategies, encouraging Chinese authorities to move billions of dollars to promote EVS and consumers to buy them.

That support has gone up in China’s supply chain and now dominates EV champions such as BYD. It also made China the largest NEV market in the world – in July 2024 NEVS accounted for more than 50% of the total auto sales in China, more than 10 years before the policy began to be set.

But that rapid growth and support has also led to China’s domestic manufacturers making more cars than can take over because the industry is struggling to hit production targets influenced by government policy, rather than consumers, Reuters said.

According to a study by Jato Dynamics, the 93 automakers operating in China have a market share of less than 0.1%.

“From the world’s point of view, it is no longer necessary to pay much attention (to NEVs), or it may lead to a big breakdown,” said Tu Xinquan, Dean and Professor of the China Institute for University Business and Economics.

When NEVS was excluded from the latest national plan, he expected that services such as the China State Planner and the ministry to announce some specific strategies to guide its future trajectory.

Focus more on new removals

It is true, the Chinese policy makers have come to their age that their ultimate goal was to stand on its own two feet and travel the highest distance of large NEV plans.

It ends the purchase program sponsored by the National Purfenge for an 2020 and aims to be used for the sale of the purchase tax in 2027 although some of the Chinese Auto Associations are closely watching the pace of the world.

A Chinese policy adviser who spoke on condition of anonymity said that EVS is not classified as an emerging strategic sector because of “a close look at our sales in the automotive sector, and our leadership in the world.”

But this legal change means that carmakers need to face the reality that their future may be determined by market competition. In the first half of this year, 11 out of 17 automakers were profitable.

Cui Dongshu, Secretary-General of the China Passenger Car Association, said the program showed that Chinese policy makers will take more targeted measures than the previous broad approach, to promote the industry of government support.

They will pressure EV makers to focus more on introducing new products and reduce production of inferior vehicles, he said.

Automakers will need to build a strong high-end workforce to gain foothold in China’s market, the world’s largest, said Shaochen Wang, a research analyst at counteport.

“For example, brands such as Byd and Leapmotor have strengthened their cost advantages by improving capabilities including developing and introducing cost-effective products;

(Reporting by Brenda Goh and Zhang Yan in Shanghai, Ellen Zhang and Laurie Chen in Beijing; Editing by Kim Coghill)