Chinese auto group slashes new energy vehicle forecast in wake of subsidy fraud
China’s top automotive industry body slashed its annual forecast for the country’s new energy vehicle sales by a steep 43 per cent, days after Beijing slapped penalties on several carmakers over a near 10 billion yuan subsidy fraud scandal that has rocked the world’s biggest car market.
The China Association of Automobile Manufacturers revised downward its estimate for this year’s new energy vehicle orders to 400,000 from 700,000, Xu Haidong, assistant general secretary with the government-backed group, said at a media briefing in Beijing on Friday.
The near-halving of the forecast came a day after the Ministry of Finance named, shamed and punished at least five automakers that allegedly defrauded the government out of almost 10 billion yuan worth of subsidies intended to promote the use of electric and hybrid cars.
“We previously made the projection based on last year’s sales figures, which include vehicles which should not have been considered new energy vehicles,” Xu said. “So there ought be changes to the forecast now.”
In a major blow to China’s booming electric vehicle industry which has benefited from 30 billion yuan in subsidies last year alone, Beijing said four automakers had cheated authorities by padding out their claimed new energy vehicle sales, while one bus manufacturer fraudulently received allowances without even producing any electric vehicles.
The ministry revoked the production licence of the bus manufacturer, Suzhou Gemsea Coach Manufacturing, and fined all the offenders, including two controlled by auto giants Chery Holding and King Long United Automotive Industry Co.
King Long shares have lost 11.2 per cent over the last three trading days in Shanghai to close on Monday at 12.02 yuan.
Industry data showed that 330,000 electric and plug-in hybrid vehicles were purchased in China last year, more than quadruple the number from a year earlier. The first eight months of the year has seen production of such vehicles in China double to 245,000 over the same period last year, cementing the country’s position as the world’s largest new energy vehicle market after the US.
But over the last couple of months the market became mired in the subsidy fraud scandal brought to light by local media, sparking an official investigation and calls for an overhaul of the current programme and a study of the points-based system adopted in the US.
“Quite a few carmakers were troubled by a cash shortfall because the subsidy payouts were postponed owing to a probe into the fraud, hence the companies were turning more cautious in their decision making,”said Xu Yanhua, deputy secretary of the automaker’s association, adding that there are uncertainties over new and amended subsidy policies to be announced by authorities, which had planned to phase out the financial aid by 2020.
China Galaxy Securities analyst Dai Kana said a tighter regulatory environment as well as changing subsidy policies would “speed up an industry-wide shakeup”, with the most competitive ones left to become stronger.