Stocks of EV Makers Suffer After China Cuts Subsidies in the Industry

Local governments in China were also urged by the ministry to remove EV subsidies after a three-month grace period.

CapitalWatch Staff
    Mar 26, 2019 11:18 AM  PT
Stocks of EV Makers Suffer After China Cuts Subsidies in the Industry
author: CapitalWatch Staff   

The stocks of Chinese electric vehicle makers fell across the board Tuesday after Beijing announced it would cut subsidies to the industry in half, with more cuts to follow, in an attempt to discourage the companies from relying on government support.

China's Ministry of Finance said today that it would cut the subsidies on electric cars with a 250-mile-and-above driving range to 25,000 yuan ($3,700) from 50,000 ($7,400), as reported by Bloomberg. Cars under the 250-mile mark would not qualify for subsidies at all.

The news wreaked havoc for EV stockholders on Wall Street. Electric carmaker Kandi Technologies Group Inc. (Nasdaq: KNDI) plunged 14 percent intraday to $5.25 per American depositary share. Its colleague, Nio Inc. (NYSE: NIO), public since September, tumbled nearly 6 percent to $5.51. The maker of electric scooters, Niu Technologies (Nasdaq: NIU) inched down 2 cents to $7.91 per share.

The9 Ltd. (Nasdaq: NCTY), a Shanghai-based online game developer, which just announced its plans to launch an EV company together with Faraday Futures Inc., did not escape the fate of its soon-to-be rivals and also tumbled an additional 10 percent to $1.82 per ADS after yesterday's 20 percent slide.

On the contrary, American automakers saw their stocks rising, with Tesla Inc. (Nasdaq: TSLA) up nearly 3 percent, at $267 a share, and Ford Motor Co. (NYSE: F) 12 cents higher, at $8.64 per share.

China has encouraged the growth of its EV sector by waiving car license fees and providing rebates for EV buyers in a number of cities in the past few years, which has led to an explosion in the number of electric car makers. More recently, however, Beijing said it intended to scale back subsidies on electric cars, even to stop them completely after 2020. Bloomberg quoted the ministry as saying the cuts aimed to boost "high-quality development of a new-energy automobile industry."

Local governments in China were also urged by the ministry to remove EV subsidies after a three-month grace period, Bloomberg said. 


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