Electric Cars

China may slash EV purchase subsidies, but why?

The world's largest car market may change tactics to help convince people to adopt EVs.

Right now, electric car sales are on the rise and companies like Tesla are regularly touted as being "the future" but the truth is, many purchases of EV's are made possible by government incentives. People aren't quite sure what will happen when those end, particularly when you consider that nobody has truly cracked the formula for a truly cheap and practical EV.

China currently offers incentives on electric vehicle purchases, but according to Bloomberg, that may not be the case forever. In fact, they may be going away sooner than many would guess. Why would the world's largest automotive market do something that at first blush seems like shooting itself in the foot? Maybe it's to stop automakers from getting complacent.

The Nissan Leaf is cheap and practical as EV's go, but at $30,000, it's not cheap enough or practical enough yet.

Tim Stevens/Roadshow

What do we mean by that? Well, if automakers don't have to focus on making their vehicles cheaper, better and more accessible to lower income individuals aka an electric car for the people (one that doesn't start at $35,000 and that can actually be purchased, for example) then they're going to just continue churning out the same overpriced and underperforming stuff they're building and selling now.

Specifically, according to Bloomberg's report, vehicles may be required to travel over 200 kilometers (125 miles) -- up 25 percent from current standards -- to qualify for any incentive and the amount of that incentive be reduced by as much as a third from what they are currently. For reference, the Chinese government spent $1 billion on electric and hybrid vehicle subsidies in 2017.

Getting automakers, both foreign and domestic to build cars that are desirable on their own, without the promise of an artificially lowered price tag, will be critical in the continued success of the electric vehicle, both in China and here, in the US.