China extended subsidies and tax exemptions for new-energy vehicles (NEVs) for two years but set the threshold at cars costing less than RMB 300,000 ($42,000), posting a challenge for Tesla’s relatively expensive battery-powered cars, reported Caixin.
NEV incentives that were due to phase out by the end of this year will be extended until 2023. Subsidies will be cut from a year earlier by 10% this year, 20% next year and 30% in 2022, according to a notice issued Thursday by the Finance Ministry.
The new standard raises the requirements for the driving range and power efficiency of NEVs to qualify for the subsidies. The driving range of eligible vehicles will increase to 300 kilometers from 250 kilometers. A fully electric car with at least 300 kilometers of driving range will qualify for a RMB 16,200 subsidy. Many of the new cars launched by domestic car makers have a driving range of more than 500 kilometers.
Li Xiang, founder of Lixiang Automotive, said the limit could give Tesla an incentive to cut its prices. If Tesla lowers the price of its basic Model 3 to RMB 300,000, the car could sell for a little more than RMB 270,000 after subsidies. This would deliver a “devastating blow” to domestic brands in the RMB 200,000-400,000 price range, Li said.