Reliance on NEV subsidies creates bubble, and domestic carmakers should abstain

By Li Qiaoyi Source:Global Times Published: 2019/10/10 18:56:45

Photo: VCG

An expo on new-energy vehicle (NEV) automatic technologies, scheduled for the end of the month in Shanghai, has reportedly been postponed until August 2020, citing a change of plans by some participating companies due to industry sluggishness. 

That the expo, albeit lesser-known than the annual auto show held alternatively in Beijing and Shanghai, has been called off stoked fears that the sector is facing doomsday. Shortly after the news broke on Thursday afternoon, the expo's webpage was inaccessible.

Will the latest signs of NEV gloom in China prompt the government to pull back its sweeping NEV subsidy cuts so as to "resurrect" a host of NEV companies that have gone bust or are on the brink of collapse? The answer is absolutely not.

It is advised that the government stay unchanged in its course to slash new energy subsidies. The hefty reliance on subsidies for survival must come to an end, as it is prone to creating bubbles than living up to pledges to develop China's homegrown NEV prowess. 

Tumbling shares of NYSE-listed NIO, a high-profile Chinese electric car start-up, also points to how foamy the NEV bubble may have become.

Additionally, waning consumer interest in NEV purchases shows the reality that efforts are still required to turn the indigenous NEV push into some sort of inelastic demand, especially as China has moved toward enabling foreign carmakers to gain greater access to its market. 

The author is a reporter with the Global Times.


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