Tesla to suffer as China cuts electric vehicle subsidies

Following the news that China’s electric vehicle (EV) subsidies will now be limited to more affordable, locally built models;

Mike Vousden, Automotive Analyst at GlobalData, a leading data and analytics company, offers his views:

“China is both the largest vehicle market and the largest market for EVs thanks to subsidies from the government encouraging consumers to ditch combustion engines. However, the sector has been dealt a blow by the news that the country will cut subsidies for premium EV models, pushing prices up and making them less competitive.

“China’s finance ministry has confirmed that it will be cutting subsidies for premium electric vehicles that cost more than ¥300,000 (US$42,357).

“That’s very bad news for notable EV maker Tesla – currently working on scaling up its Shanghai production base. The cheapest model the company currently produces in the country – the Model 3 – costs nearly ¥325,000, meaning it won’t qualify for subsidies and will be less competitive compared to more affordable EVs built by established Chinese companies.

“While Tesla itself has proven remarkably resilient during the current crisis and has seen its market capitalisation grow in spite of falls for peers in the automotive sector, the loss of Chinese subsidies is a real concern. It is likely to dent demand for its products in the world’s largest car market and give local Chinese competitors – who are also rapidly improving their product offerings – a boost due to their price advantage.”

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