Chinese auto group slashes new energy vehicle forecast in wake of subsidy fraud

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Analysts say a tighter regulatory environment as well as changing subsidy policies would speed up an industry-wide shakeup. Photo: AP

Published: 7:32pm, 12 Sep 2016

China’s top automotive industry body slashed its annual forecast for the country’s new energy vehicle sales by a steep 43 per cent, days after Beijing slapped penalties on several carmakers over a near 10 billion yuan subsidy fraud scandal that has rocked the world’s biggest car market.

The China Association of Automobile Manufacturers revised downward its estimate for this year’s new energy vehicle orders to 400,000 from 700,000, Xu Haidong, assistant general secretary with the government-backed group, said at a media briefing in Beijing on Friday.

The near-halving of the forecast came a day after the Ministry of Finance named, shamed and punished at least five automakers that allegedly defrauded the government out of almost 10 billion yuan worth of subsidies intended to promote the use of electric and hybrid cars.

“We previously made the projection based on last year’s sales figures, which include vehicles which should not have been considered new energy vehicles,” Xu said. “So there ought be changes to the forecast now.”

In a major blow to China’s booming electric vehicle industry which has benefited from 30 billion yuan in subsidies last year alone, Beijing said four automakers had cheated authorities by padding out their claimed new energy vehicle sales, while one bus manufacturer fraudulently received allowances without even producing any electric vehicles.

Quite a few carmakers were troubled by a cash shortfall because the subsidy payouts were postponed owing to a probe into the fraud

Xu Yanhua, China Association of Automobile Manufacturers

The ministry revoked the production licence of the bus manufacturer, Suzhou Gemsea Coach Manufacturing, and fined all the offenders, including two controlled by auto giants Chery Holding and King Long United Automotive Industry Co.