For most of the best-selling electric vehicle models, the amount of subsidies as a percentage of the selling price is only 4-11 percent this year, CITIC Securities said.

(Image credit: CnEVPost)

As the end of the year approaches, the imminent withdrawal of state subsidies for China's new energy vehicle (NEV) industry is starting to gain more attention.

Based on an analysis of China's subsidy policies for the NEV industry over the past few years, the impact of the subsidy withdrawal will be limited next year, and the upward trend of electrification and intelligence in the auto industry will remain unchanged going forward, said CITIC Securities analyst Yuan Jiancong's team in a research note today.

The team forecasts full-year China NEV sales of about 9 million units in 2023, up 31 percent from 2022.

China's state subsidy for NEV purchases, which was reduced by 30 percent this year from 2021 levels, will end on December 31, and vehicles that receive license plates after that date will no longer be eligible for the subsidy.

For NEVs sold in China, the average amount of subsidies received per vehicle decreases from RMB 36,000 ($4,961) - 44,000 in 2017 to RMB 11,000 - 18,000 in 2021, according to CITIC Securities' analysis based on data from the China Passenger Car Association (CPCA).

In terms of the share of subsidies in the selling price of the best-selling models, it was about 35 percent in 2017, and the ratio drops to about 10 percent by 2021, according to the team.

Until 2020, China's NEV sales are highly perturbed by changes in subsidy policies, and from 2021 onwards, subsidies are mildly retreating as expected, with the impact on the NEV market becoming smaller, the note said.

From January to August 2022, among the top 10 pure electric passenger car sales, three models could not receive subsidies, namely Wuling Hongguang Mini EV, Model Y and Chery QQ Ice Cream. Among them, Model Y could not get subsidies because its price was higher than RMB 300,000, and the other two did not meet the conditions because of their ranges.

For the other models, the average subsidy received per vehicle was around RMB 10,000, accounting for only 4 percent-11 percent of the pre-subsidy selling price, CITIC Securities noted.

The delivery of some newly released models this year will have to wait until around the Spring Festival in 2023, and some car companies will provide the same amount of subsidies as this year for orders not delivered during the year, so the negative impact of subsidy withdrawal in the first quarter of next year is expected to be manageable, the team said.

Meanwhile, the overdraft effect on demand in the first quarter of next year, which will be seen in the fourth quarter of this year because of the subsidy withdrawal, will be weaker than in previous years, the team said.

For vehicle profits, the impact of the subsidy withdrawal is there, but it is not the main factor, the team said, adding that the biggest impact on vehicle companies is still whether their own sales can meet growth expectations.