China’s Ministry of Industry and Information Technology (MIIT) has disclosed that automakers Chery and BYD improperly claimed a combined 384.4 million yuan (US$53.5 million) in government subsidies for eco-friendly vehicles from 2015 to 2020.

This figure represents nearly 60% of the total improper claims identified during that period.

An audit found 21,725 vehicles failed to meet subsidy standards, with Chery and BYD linked to 7,663 and 4,973 vehicles respectively.

Although no penalties were specified, the government may require automakers to repay subsidies for vehicles that fall short of mileage standards.

The disclosure comes amid industry-wide issues like overcapacity and a price war, prompting Beijing to tighten pricing rules and cut outdated production.

China’s subsidy program, active from 2009 to 2022, helped boost new energy vehicle sales, which have outpaced gasoline car sales monthly since March 2023.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ China’s EV subsidy program: A $58 billion investment with oversight challenges

China’s generous subsidy program that ran from 2009 to 2022 represented a massive financial commitment to jumpstarting electric vehicle adoption.

The government invested approximately $58.3 billion between 2009 and 2017 alone, with about $36.6 billion directed specifically toward consumer subsidies 1.

These incentives proved remarkably effective, helping EV sales grow from 507,000 in 2016 to 770,000 in 2017, eventually leading to NEVs surpassing gas-powered vehicle sales by 2023 2.

The scale of this program created significant oversight challenges, as demonstrated by the 21,725 vehicles found ineligible for subsidies during the 2015-2020 audit period.

Subsidy programs of this magnitude are particularly vulnerable to fraud and misuse, especially in rapidly growing markets where regulation often struggles to keep pace with industry expansion.

The phasing out of subsidies, begun in 2019 when Shanghai’s subsidy dropped from $9,800 to $3,560, created additional pressure on manufacturers to maintain sales growth while facing reduced government support 2.

2️⃣ Fraud risks in government-driven market transformations