China will tighten its regulations on the heavily subsidized and fast-growing new energy vehicle (NEV) industry, adjusting subsidy levels and raising technical requirements, after government investigations found widespread cheating in the subsidy programs.
The Ministry of Industry and Information Technology (MIIT) said on Wednesday that the central and local governments will join efforts to "severely punish" companies and relevant people for engaging in subsidy cheating activities and to help foster a sound industry through enhanced supervisions, according to a statement on the ministry's website.
The government will adjust the subsidy policies for some segments, where the subsidy level is too high and the technical requirements are too low, according to the statement. For such segments, technical requirements will be raised and limits will be set on central and local governments' subsidies, it said.
Though the MIIT statement did not disclose the adjustment details, such moves are not only conducive to the long-term development of the NEV sector but necessary because of the widespread cheating, said Zeng Zhiling, an analyst at Shanghai-based consultancy LMC Automotive.
"These subsidies were put in place to help foster a sound NEV industry, but some companies have cut corners to take advantage of the subsidies and created a serious problem," Zeng told the Global Times on Wednesday.
He said while such measures might hurt NEV's production and sales in the short term, they are good for the future of the industry.
"Short-term pain, long-term gain," Zeng said, noting without tightening regulations, firms will not "think about how to advance technologies such as car batteries, but how to cheat."
The MIIT statement said the ministry had penalized four companies -Suzhou Higer Bus Co, Henan Shaolin Bus Co, Chery Wanda Bus and Shenzhen Wuzhoulong Motors Group - for falsifying documents to claim subsidies for vehicles they didn't have.
The ministry had issued penalties for the companies, including ordering the companies to halt production and selling of problematic models and temporarily revoking their licenses. But the statement did not say how much money was involved.
In September, five companies, including the above-mentioned four, were penalized for cheating of about 0 million in government subsidies, according to a statement from the Ministry of Finance (MOF) on September 9. It was not clear if the penalties the MOF imposed were related to the ones announced by MIIT on Wednesday.
NEV production and sales have been growing exponentially in China. In the first 11 months of this year, NEV output and sales grew by 59 percent and 60.4 percent, respectively, from the previous year, according to data released by the MIIT on Monday.