The Chinese government has poured 33.4 billion yuan in subsidies since 2009. The\u00a0government decided to establish a world-leading industry and increase jobs and exports, and to reduce oil dependence and the urban pollution. The incentive policy offers subsidies to encourage the companies that build electric cars, plug-in hybrids and fuel-cell vehicles to produce and sell electric vehicles (EVs). But a report from the Ministry of Finance of China exposed that at least five automakers defrauded the government for a total of 1 billion yuan ($150 million) in subsidies aimed at promoting EVs in September 2016.<\/p>\n
Since some incentive regulations were vague and under weak\u00a0supervision, speculators learned how to reap the benefit from a poorly crafted subsidy\u00a0system the government had launched.\u00a0For example, a\u00a0big portion of the subsidies flowed into unqualified or non-existing cars made by dishonest companies. One of the bus manufacturers involved in the scandal was the Higer Bus in Suzhou, which received about a half billion yuan in subsidies through sales inflation. The five companies defrauded an average of 25,000 yuan per car, according to the government report.<\/p>\n
In some cases, the manufacturers sold unqualified or faulty cars to related parties (for example, the companies\u2019 own leasing subsidiaries). After the companies received the subsidies from the government, the buyers returned the cars. In other cases, the makers installed dysfunctional batteries or even one battery in\u00a0different vehicles.<\/p>\n
The high profit under the government support cultivated another deal model between the sellers and the buyers. An electric bus worth one million yuan would be priced at\u00a0two million yuan. The buyers only needed to pay one million yuan,\u00a0but the sellers forged a two million yuan receipt to apply for the government subsidy.<\/p>\n
<\/a><\/p>\n The government planned to phase out the subsidies on the EV industry from 2016 to 2020. The manufacturers stepped up the production by adding incomplete or unlicensed vehicles, especially in the end of 2015. The total number\u00a0of EVs sold in the fourth quarter increased by 92,000 dramatically. The monthly production in December 2015 quadrupled compared to the number in December 2014. Higer Bus sold 2,000 EVs with 83.9 percent incomplete in December 2015, which amounted to one-fifth of the company\u2019s yearly sales.<\/p>\n
\nChina saw a big boom of EVs in 2015<\/em><\/p>\n