Since the State Council issued the "Development Plan for Energy Saving and New Energy Vehicles (2012~2020)" in 2012, the central and local governments have started to introduce "all-round and multi-level" support measures for the new energy vehicle industry, involving tax reduction and exemption for new energy vehicle enterprises, research and development support, consumption preferences for new energy vehicle consumers, supporting infrastructure construction, purchase subsidies and other aspects.
The investment of a large amount of financial subsidies has enabled China’s new energy automobile industry to achieve explosive growth in a relatively short period of time, but the extensive subsidy policy and the excessive disorderly growth of the industry have also brought many problems. Such as the lack of core technology, some enterprises using policy loopholes to cheat, etc., have become obstacles to the development of new energy automobile industry.
In recent years, the central government has issued an adjustment notice on the optimization policy of the new energy automobile industry, guided the new energy automobile industry in more detail, and gradually started the process of subsidizing the slope to guide the industry to develop healthily. In particular, the subsidy policy released in 2020 has optimized the existing policies. On the one hand, it is announced that the subsidy policy will be postponed until 2022, and the pace and intensity of slope retreat will be eased; On the other hand, the industrial policy has been further adjusted from the aspects of technical indicators, subsidy accuracy, subsidy methods, fund supervision and improvement of supporting measures, so as to avoid the problems that have appeared in the past.
All these measures reflect that supporting the development of new energy automobile industry has become a national basic strategy. This paper will give a comprehensive description of the development status and existing problems of China’s new energy automobile subsidy policy, and put forward corresponding problems and suggestions. At the same time, combined with the important goal recently put forward by the Supreme Leader General Secretary to strive to achieve carbon neutrality by 2060, this paper puts forward some suggestions on how to better guide and promote the new energy automobile industry to achieve carbon neutrality according to the existing industry policies.
China Significance of Subsidy Policy for New Energy Vehicles
1. New energy vehicles have positive externalities, and it is difficult to achieve the optimal scale of new energy vehicle supply simply by relying on market forces, so government financial subsidies are needed.
New energy vehicles have obvious positive externalities. First of all, it can reduce environmental pollution, improve air quality and reduce carbon emissions. At the same time, it can also alleviate the external dependence of oil and ensure national energy security. If only the market supply and demand are allowed to price new energy vehicles, the positive externalities cannot be reflected in the prices of new energy vehicles, and the optimal scale required by society cannot be achieved. In this case, it is necessary for the government to correct the problem of market mechanism pricing failure of new energy vehicles through appropriate administrative measures, such as financial subsidies.
China’s economic growth and the development of the automobile industry have continuously increased oil consumption, and this trend of continuous growth will not change in the short term, whether it is car ownership or crude oil consumption. At present, China is the largest crude oil importer in the world. In 2019, China’s crude oil imports reached 510 million tons, up 9.5% over the same period of last year. The annual domestic crude oil output was only 190 million tons, and its dependence on foreign countries reached 72%. The external dependence of oil threatens the energy security of China. The large-scale popularization of new energy vehicles can alleviate the external dependence of oil by replacing oil with electric energy.
2. The popularization and promotion of new energy vehicles can participate in the peak-shaving and valley-filling of the power grid and reduce the peak-shaving pressure of the power grid.
With the economic development, the peak load of China power grid system continues to increase. In 2018, the commercial and residential electricity consumption in the United States was 75%, while that in China was only 30%. With the widening gap between peak and valley, the pressure of peak shaving increased rapidly. The popularization of new energy vehicles will provide a new solution to reduce the peak-shaving pressure of power grid. Different charging prices can be provided according to the pressure of power grid at different time periods, and charging fees can be used as a means of regulation to drive users to charge when electricity consumption is low, so as to realize peak-shaving and valley-filling and improve the overall efficiency of power grid system. At the same time, the peak-shaving and valley-filling function of new energy vehicles can also strengthen the power grid’s ability to absorb clean energy and electricity, and further promote the process of energy conservation and emission reduction in the whole society.
3. The combination of new energy vehicles and new energy can reduce the emission of greenhouse gases and air pollutants, thus improving the environment and promoting the process of carbon neutrality.
Both pure electric vehicles and hybrid electric vehicles use electric energy to partially or completely replace fossil fuels to generate power. Therefore, the greenhouse gases and air pollution produced by new energy vehicles are lower than those produced by traditional energy vehicles. According to the experimental data of the State Key Laboratory of Urban and Regional Ecology of the Center for Ecological Environment Research of Chinese Academy of Sciences, even considering the emissions from the upstream primary energy exploitation and transportation, power production and transmission and distribution, the emissions of greenhouse gases and air pollutants from new energy vehicles are far lower than those from traditional energy vehicles.
In the future, with the application of clean power and efficient industrial dust removal and desulfurization technologies, new energy vehicles will also bring more obvious emission reduction and environmental protection effects. Recently, high-level officials made it clear that China will strive to achieve carbon neutrality by 2060, and the promotion and popularization of new energy vehicles is of great significance to the realization of this goal.
Current situation of subsidy policy for new energy automobile industry
Since 2016, the central government began to gradually decline the financial subsidy policy for new energy vehicles, and made it clear that the subsidy scale of each manufacturer will be determined by combining the energy saving and emission reduction effects of new energy vehicle manufacturers, the manufacturing costs of each manufacturer, the scale effect of each manufacturer and the level of technological development, and this scale will decrease year by year. For example, the subsidy standards in 2017 and 2018 will be about 20% less than those in 2016, while the subsidy standards in 2019 and 2020 will be determined. At the same time, establish standards for manufacturers to produce complete vehicles, and require stable performance of complete vehicle products; Perfect after-sales service and emergency safeguard measures; The warranty period and battery recycling should meet the standards.
It can be said that the policy basically laid the tone of the central government’s financial subsidy policy for new energy vehicles during the period from 2016 to 2020, and adjusted some details around this main tone. For example, during the five years from 2016 to 2020, the government successively issued five editions of financial subsidy policy notices on the promotion and application of new energy vehicles. Except for the great changes in the policy in 2020, the policy notices in other years mainly improve the existing policies from the details of the policies themselves. Among them, the main policy changes from 2016 to 2019 can be summarized as follows:
(1) raise the technical threshold, optimize the technical indicators, and really tilt the financial subsidies to those high-quality enterprises with core technologies and products. Improve the technical threshold for pure electric passenger cars and encourage enterprises to use and apply high-performance batteries.
(2) Improve the subsidy standards for new energy vehicles, and adjust and optimize the subsidy standards for new energy vehicles according to the cost changes. Encourage the popularization and application of high-tech, safe and reliable products.
(3) Breaking local protection and establishing a unified market. It is stipulated that all localities should not take any form of local protectionist measures, including but not limited to setting up local catalogues or filing, restricting the issuance of subsidy funds, conducting repeated inspections on new energy vehicles, requiring production enterprises to set up factories locally, and requiring enterprises to purchase local parts and components.
(4) Improve the liquidation system and fund supervision, consolidate the responsibility of the supervision layer, give full play to the role of social supervision, increase the punishment for fraudulent enterprises, and resolutely crack down on fraudulent behaviors.
(5) Strengthen market supervision and management, implement producer responsibility, and improve the production, sales and service management level of new energy automobile enterprises. Enterprises are required to further strengthen the management and control of their own production and sales links to ensure the safety, stability and reliability of their products. Improve the after-sales service of new energy vehicles to ensure that consumers’ rights and interests are protected.
The latest financial subsidy policy released in 2020 is a major adjustment in recent years. The biggest difference from previous industrial policy adjustments lies in extending the period of financial subsidies for new energy vehicles, easing the intensity and rhythm of subsidies, and extending the implementation period of financial subsidies for the promotion and application of new energy vehicles to the end of 2022. In addition, the notice also emphasized the modification of subsidies for fuel cell vehicles, demanding further breakthroughs in the fuel cell industry chain and core technologies to form a good situation of rational layout and coordinated development.
Problems in Subsidy Policy for New Energy Vehicles
Through financial subsidies, the production capacity and sales volume of new energy vehicles in China have achieved rapid growth. In 2016, the annual output was only 511,000 vehicles, and in 2019, it reached 1.239 million vehicles, and the output increased by 1.5 times in four years. In 2019, the global output of new energy vehicles reached 2.21 million vehicles, and China occupied more than half of the production capacity.
However, behind the rapid growth of output, it mainly relies on the huge financial investment of the government and industrial policy dividends. With the rapid development of the whole industry, many negative effects and disadvantages have gradually emerged. From the overall process of the development of new energy vehicles in China, the main problems of industrial subsidy policy can be summarized as follows:
1. Improper subsidy design leads to extensive industrial development model and low-end overcapacity. Moreover, due to the lack of supervision, enterprises cheat in the early stage of industry development, resulting in a lot of waste of funds and resources.
By May 2020, the Ministry of Finance had issued a total of 120.64 billion yuan of financial subsidies to support the new energy automobile industry, which greatly stimulated the rapid expansion of the new energy automobile industry, but also led to a "growth bubble". In order to maximize profits, some enterprises, under the banner of developing new energy vehicles, produce a large number of inferior electric vehicles that do not meet the national safety standards with inferior and crude technology.
After the subsidy policy was implemented, the output of new energy vehicles showed a blowout trend. In 2016, the annual output reached about twice the annual sales volume, and a large number of new energy vehicles did not enter the sales and public transportation fields. In 2019, the publicity of the audit of the Ministry of Industry and Information Technology showed that enterprises had declared a total subsidy of 237,000 new energy vehicles, and only 207,000 vehicles were approved.
2. In the design of subsidy policy for new energy automobile industry, the market mechanism is insufficient, and the development relies too much on financial subsidies, which leads to the lack of independent innovation motivation of enterprises and affects the sustainable development of the whole industrial chain.
The notice of financial subsidy policy in 2020 announced the extension of subsidy policy and slowed down the pace of slope retreat. It not only shows the government’s determination to support the development of new energy vehicles, but also reflects many problems in the industry, and the development also depends on financial subsidies. If the subsidy is withdrawn, the industry development is likely to enter a bottleneck period, and independent sustainable development cannot be achieved.
In view of the above problems, the government has recently made necessary improvements in the adjustment document. Constantly strengthen supervision, and add more hard audit indicators in the cumulative mileage and battery life of new energy vehicles. Although the addition of these audit indicators has increased the workload of the financial subsidy process for new energy vehicles, it may lead to a relatively slow subsidy for capital settlement in the short term. But in the long run, it can improve the cheating behavior of enterprises and improve the standard of product quality to a great extent, which is a kind of promotion for enterprises to strengthen the research and development of core technologies of new energy vehicles and improve their core competitiveness. Therefore, the government should strengthen the supervision of product quality in the new energy vehicle market, and implement the step subsidy policy, that is, give more financial subsidies to high-quality batteries with longer cruising range, and also improve the efficiency of supervision and the progress of audit and settlement of subsidy funds, so that the subsidy funds can be returned to the first-line enterprises that are actually engaged in R&D as soon as possible.
How does the subsidy policy guide and help the new energy automobile industry
Speaking at the general debate held by the United Nations on September 22nd, the Supreme Leader of president, China emphasized that China’s carbon dioxide emissions will strive to reach the peak by 2030 and be carbon neutral by 2060.
The automobile industry is one of the industries with the highest carbon dioxide emissions. Whether it is metallurgy, chemical engineering, machinery design and manufacturing in the upstream of the whole industrial chain, or transportation, leasing, fossil fuel mining and the life cycle of the automobile itself in the downstream of the industrial chain, a large amount of carbon emissions will be generated.
In addition, as a developing country, China’s automobile industry is also in the stage of rapid development. By 2019, China’s automobile ownership reached 253.9 million, an increase of 21.56 million over the previous year, with a growth rate of 9.3%, and the growth will continue with economic growth. In essence, several new energy automobile manufacturers are traditional automobile manufacturers. The realization of carbon neutrality in automobile industry will be a great guarantee for China to achieve carbon neutrality in 2060. To achieve this goal, it is far from enough to rely on the development of the industry itself and the progress of the market. The government must play the role of a good manager and guide in this process.
In view of the existing subsidy policy of new energy automobile industry in China and the experience of some foreign automobile enterprises that have promised to achieve carbon neutrality, the following suggestions are put forward.
1. The main contradiction in the development of new energy vehicles has changed, and the focus of contradiction in the future development is infrastructure construction. With the large-scale popularization of new energy vehicles and entering thousands of households, the government should be the main promoter of infrastructure construction, either through laws and regulations or through government subsidies.
The financial subsidy policy for the new energy automobile industry should be adjusted with the maturity of the industry itself, and traditional automobile manufacturers should be encouraged to increase investment in the new energy automobile industry and increase the proportion of new energy vehicles. Major traditional automobile brands in Europe are also investing in and researching new energy vehicles. Since the development of new energy vehicles has multiple strategic interests for China, the government should further support the development of new energy vehicle industry.
2. Financial subsidies are limited after all, so the government needs to strengthen the market mechanism design in the subsidy policy while further ensuring financial input, so that new energy vehicles can really be accepted by market consumers.
As the new energy automobile industry in China is still in the development stage, there are still shortcomings in core technologies. Therefore, further financial support is necessary, but we should learn from previous experiences and lessons. On the one hand, we will improve the auditing standards of subsidies for new energy vehicles, such as setting the cumulative mileage index of new vehicles in the next two years, and formulating the policy of step subsidies according to the quality level of batteries, so that subsidies can really flow into enterprises with high-quality new energy vehicles with market competitiveness.
On the other hand, we should fulfill the responsibility of the government as a market supervisor, give full play to the decisive role of the market in resource allocation, strengthen the dominant position of enterprises in the selection of technical routes, and give better play to the role of the government in the formulation of standards and regulations, quality and safety supervision, etc. After all, financial subsidies can only play an auxiliary role. To truly realize the promotion and development of new energy vehicles, new energy vehicles need to be truly accepted by market consumers.
3. Incorporate the assessment standard based on carbon neutrality goal into the audit system of industry subsidy policy, accelerate the construction of carbon trading market, and help enterprises establish a multi-channel and low-cost carbon emission reduction system.
Financial subsidies play an important role in the current development of new energy automobile industry. We can give full play to the guiding role of subsidy policies, and incorporate the assessment criteria based on carbon neutrality goals into the audit system of subsidy policies for new energy automobile industry, so as to promote the process of carbon neutrality in the industry.
If the automobile manufacturing industry wants to achieve carbon neutrality, it is difficult to achieve it only by its own energy saving and emission reduction, which is determined by its own industry attributes. The whole industrial chain of automobile manufacturing industry has carbon emissions, and it is relatively difficult to reduce the carbon emissions. Many links in the industrial chain, such as chemical industry, machinery manufacturing and metallurgy, have high emission reduction costs. Therefore, it is necessary to speed up the construction of carbon trading market and optimize the allocation of carbon emission resources through market mechanism, so as to maximize the overall benefits of society and improve carbon emission reduction and economic efficiency.
(The author is Dean of China Institute of Energy Policy, Xiamen University)
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