New energy vehicle subsidies in spotlight as ministries launch probe

A ministry-level nationwide investigation is set to be launched into fraudulent subsidies of new energy vehicle manufacturers, the Ministry of Finance said on Monday.

The investigation will target new energy vehicle manufacturers that received subsidies from the government in 2013 and 2014, and those who applied for the subsidies in 2015. The probe will be jointly conducted by the ministries of industry and information technology, finance, and science and technology, and the National Development and Reform Commission.

The high subsidies and lack of supervision of new energy vehicles have given rise to fraudulent behavior, according to an investigative report released earlier this month by The Economic Observer, a Beijing-based newspaper.

A conventional vehicle, once installed with new energy batteries, can get up to 100,000 yuan ($15,200) in subsidies, which is much higher than its actual cost, The Economic Observer quoted employees working for new energy vehicle companies in Jiangsu province as saying.

According to the report, some companies would produce poor-quality electric cars, and then secretly set up a car rental agency that buys all the cars in exchange for millions of yuan in subsidies. These cars will eventually end up being dumped in a warehouse. In December 2015, sales of new energy commercial vehicles reached 63,525 units, around double the figure on a year-on-year basis.

But this incredibly rapid growth has sounded alarm bells with the authorities.

Xu Changming, director of the resources development department of the State Information Center, said that total sales of new energy vehicles in the first 10 months of 2015 nearly doubled the number of these vehicles that received license plates.

He suspected that the swindlers might have used electric batteries from sold vehicles and installed them in new ones in order to boost the sales volume.

According to the government's policies, new energy vehicle manufacturers are entitled to subsidies in research and development as well as sales. Each vehicle can be eligible for subsidies from the central government and the same amount of subsidies from local governments. One electric car, once sold, can generate subsidies of up to 120,000 yuan.

Jia Xinguang, a senior analyst with the China Automobile Dealers Association, said that most new energy vehicle manufacturers are law abiding, and the general business environment is sound and healthy.

"The reason for the swindles is a lack of regulation and supervision. One possible solution is to collect the data on one platform, including data on the battery, engine and millage. Investment in research and development is very high in the new energy vehicle industry. The easy and large profits made by dishonest people, if not checked, are going to have a very destructive effect on honest manufacturers," said Jia.