To be eligible for subsidies, NEV's (BEV and HEV's) must now have a driving range of at least 250km, compared with 150km in 2018. National subsidies have declined by more than 50%, whereas local subsidies will be eliminated completely after a three-month transition period.

Subsidies for BEV's (battery electric vehicles) with a driving range of 400km and above will be halved from RMB 50k (US$ 7.4k) to RMB 25k (US$ 3.7k). Subsidies for BEV's with a driving range between 250km to 400km will be reduced to RMB 18k (US$2.7k).

As China is the dominating market for EVs, this policy will have a major impact on the whole industry. In the short-term it will definitely lead to less demand for electric vehicles. This will have a negative impact on the whole value chain. In addition, it will lead to consolidation, because only battery producers can survive, which have state-of-the-art technologies. Therefore battery producers must invest in research and development, including optimising battery manufacturing processes. In the long-term this will raise the competitiveness of Chinese battery producers.

It is also an indication, that Chinese producers are able to compete with leading groups in the industry from Korea and Japan, as of today.

China’s NEV credit system puts also pressure on OEM's. They are faced with fines, but at the same time have to look for increasing market share.