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China Mulls Extending EV Subsidies Amidst Surging Raw Material Costs

Tyler Durden's Photo
by Tyler Durden
Wednesday, May 18, 2022 - 07:25 PM

In a move that could have profound effects for the EV market in China, Beijing is reportedly reconsidering its EV subsidy, which it had previously planned to end this year.

The country's Ministry of Information and Industrial Technology, along with government officials, are mulling the idea over with automakers, Reuters reported, citing 3 people familiar with the matter.

Terms of a potential extension haven't been finalized, but such an extension would be a drastic shot in the arm for the EV industry after Beijing had been posturing for months that the subsidy would definitely be coming to an end.

Recall, last month, we published an article on how China was seeking to control the global EV supply chain. That came weeks after we wrote about how Chinese EV manufacturers - like U.S. automakers - were grappling with rising raw material costs.

We noted that many EV manufacturers were doing the only thing they could to help alleviate the pressure - and that meant rising prices. This may be why the idea of extending the subsidy has caught back on in recent weeks.

We noted in April that the pricing problems China faced were more unique to the country, because it was also trying to engineer a "soft landing" from EV subsidies, which Beijing had planned to roll back.

"What makes China unique is its commitment to simultaneously rolling back EV subsidies, setting up a delicate balance between growth and profit in the world’s biggest market for clean cars," Bloomberg wrote back in April. 

Companies like Tesla, BYD, Xpeng and Li Auto all hiked prices in March, we noted. Among the manufacturers raising prices was also Contemporary Amperex Technology, the world’s biggest EV battery maker. They said they were making “dynamic adjustments to the prices of some of our battery products”.

Remember, we wrote days prior that Japanese automakers were also grappling with the skyrocketing cost of raw materials and a shortage of semiconductors. 

 

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