China's electric car subsidy scandal: BYD and Chery undeservedly received millions from the state
An audit of China's state subsidy programme for electric vehicles has revealed widespread irregularities. BYD and Chery received hundreds of millions of yuan without meeting the conditions of support.
Here's What We Know
The audit covered the period from 2016 to 2020 and found that about 864 million yuan (about $121 million) was paid to the automakers unreasonably. Specifically, Chery received 240 million yuan (about $33 million) for 8,860 cars that did not qualify for subsidies.
BYD, China's largest electric car maker, received 143 million yuan (about $20 million) for just 4,900 cars that also did not qualify. It is not yet clear whether the companies are obliged to repay the funds or whether they will be deducted from future payments.
The government support programme, launched in the early 2010s, involved payments of up to 60,000 yuan (about $8,400) per electric car. The money was transferred directly to manufacturers, who could reduce retail prices. However, as early as 2016, authorities reported massive fraud, with dozens of companies receiving an estimated 9.3 billion yuan (about $1.3 billion) fraudulently.
In addition to subsidy abuse, Chinese regulators are concerned about other dubious practices. Manufacturers have been urged to stop price wars and inflating sales volumes. One common method is to supply new cars to dealers, who immediately register them so the manufacturer can account for the sale. Such cars later appear on the market as used cars with no mileage.
Source: Bloomberg
