Bloomberg’s headline says it all: “A subsidy-fueled boom helped build China into an electric-car giant but left weed-infested lots across the nation brimming with unwanted battery-powered vehicles.”
While China’s troubling wastelands of EVs is the result of more than simple supply and demand, it could be a glimpse into our future in the U.S. where federal, state, and even local governments know all too well how subsidies and government-funded feelgood programs end up fueling massive fraudulent schemes.
“About a decade ago, encouraged by government subsidies, hundreds of automakers across China, both established players and startups, waded into electric-car manufacturing. They churned out huge numbers of early-stage EVs — relatively no-frills cars whose batteries in some instances could only run for around 100 kilometers (62 miles) on a charge…
“The demand helped juice an industry that has grown exponentially ever since. China is now the world leader in clean cars, producing around 6 million EVs and plug-in hybrids last year, or almost one in every three new cars sold domestically. It accounts for 60% of the world’s current electric fleet, and has the most extensive EV charging infrastructure on Earth — also built with government support.
“But that lightning-fast development also left behind plenty of casualties. Many of the ride-hailing companies that were early adopters of EVs have gone out of business. There are now around 100 Chinese electric-car makers, down from roughly 500 in 2019…
“In the mid-2010s, China ramped up its push for EV adoption with a credit system that rewarded automakers for producing EVs and penalized the manufacturing of high fuel-consumption cars. A 2021 Fitch Ratings Inc. report raised the possibility that some companies started ride-hailing companies as an easy way to absorb their growing inventories of EVs that weren’t being bought by the public.
“Some companies also began cheating the subsidy program by falsifying records for non-existent EVs. For example, they could produce an empty chassis that didn’t contain a battery, or make cars with batteries that didn’t meet the correct specifications. The official People’s Daily in 2016 cited estimates that dozens of companies had fraudulently claimed more than 9.3 billion yuan ($1.3 billion) in subsidies.”
Click here to read Bloomberg’s report.