The United States and China are two fundamentally different countries, and nowhere does that shine through more obviously than in transportation. While American politicians block any and all efforts to promote alternative fuels and high-speed transportation, China has wholly embraced these concepts. And now China’s government has revealed a new set of extremely generous subsidies that will apply to all electric vehicles built in China.
According to China Daily, the Chinese government is making electric vehicles a top priority, putting aside $1.5 billion per year for the next ten years to advance the EV market. For all domestically-produced electric vehicles (of which there are currently 49 either on the market or soon coming to market), the government will waive sales tax, effectively cutting EV prices by 9%.
Additionally, subsidies of up to 120,000 yuan ($19,100) will be offered, which is up from the 60,000 yuan (or about $9,500) that the government had previously offered. As with U.S. subsidies, the amount will be reduced as more and more EVs are sold. Fuel cell vehicles will also benefit from the tax break, though hybrids will only get a 50% reduction in sales tax.
As for EVs made outside of China? They not only get zero subsidies, but must pay a 25% customs duty on top of the 9% sales tax, meaning it all but kills the market for imported EVs.
How does America respond? By cutting three EV tax credits, and threatening to repeal the $7,500 tax credit, on top of killing any and all hopes of having a high-speed rail network linking our country. It will be interesting to see what effect, if any, these tax credits have on electric vehicle sales in China, as questions about range and charging are universally shared.
But if I could save almost $20,000 off the cost of a LEAF or Volt, I’d go buy one tomorrow. As it is, we all stand a better chance of affording cheap Chinese-made EVs as they prop up this burgeoning domestic industry. Foreign automakers like VW and GM are going to have to sign alliances or build their cars in China to compete, each carrying its own costs that can’t necessarily be put into gains or losses columns.