China is the world's largest auto market. Changes in the mainland mean changes for the rest of the world.
Despite the fact that China is well on its way to becoming the largest economy on Earth, it is by no means a land of free economy. Government regulations run rampant, dictating everything from which websites its citizens can access to which cars they can buy. That last part is mostly incentive-based, but it’s one of the main reasons automakers around the world have been making such a hard push for electric cars. With the Chinese government giving such high incentives to buyers, it’s little surprise that the market is adjusting to fill that demand.
While every automaker from Ford to BMW have announced plans to debut a slew of efficient vehicles designed to clear strict regulations and get drivers around with the least amount of carbon emissions possible, they are only doing so on the assumption that people will actually buy these cars. That's set to change soon in China according to a report by Bloomberg. That’s because the Chinese Ministry of Finance is planning to tell local governments to stop subsidizing electric car sales within their regions in an effort to stop mandates that encourage protectionism for automakers based within certain localities as well as to reign in excessive government spending.
That doesn’t mean that incentives from the central government will disappear, but the fact that there will be less of an incentive structure available for automakers that make electric cars could pose a problem for the industry. The central Chinese government’s current incentive structure favors cars that can run over 155 miles or more on a single charge, giving buyers up to $6,653 in subsidies, and caps local authorities from pitching in more than 50% of the central grant in their own subsidies. Now that the world’s largest auto market is cutting this large incentive program, there could be less people around who want to buy these new electric vehicles.
Will that put a stop to the billions of dollars that automakers have already invested in EV technology? Not likely, but even a slowdown of the movement can have an effect on which vehicles we’ll see on our roads in the coming years.