China extends electric-car subsidies to fight air pollution

China will give more subsidies for electric vehicles than previously announced as part of government plans to tackle pollution. Shares of BYD Co rose.

Subsidies for 2014 will be cut by 5 per cent, instead of the previously announced 10 per cent, and decreased by 10 percent in 2015, instead of 20 per cent, the finance ministry said in a joint statement with the National Development and Reform Commission, technology and industry ministries.

Pressure is mounting for China to contain air pollution, which reached record levels in Shanghai last year and prompted many cities to introduce emergency measures, including restricting the use of vehicles on heavily polluted days. The nation is lagging behind its target to have 5 million of the vehicles by 2020 because of high costs.

“The policy benefits public buses, environmental sanitation vehicles, the fleet vehicles,” said Yale Zhang, managing director of Autoforesight Shanghai Co. “Extending subsidies beyond 2015 is to reduce confusion.”

BYD, maker of the battery-powered K9 bus, surged by the 10 per cent daily limit in Shenzhen trading and gained 4.6 per cent in Hong Kong.

China will support the promotion of new-energy vehicles in a second batch of cities and regions, including the northeastern provinces of Jilin, Liaoning and Heilongjiang, the finance ministry said in a separate statement dated January 27.

BYD visit

Premier Li Keqiang said during a visit to electric carmaker BYD last month that local governments should take a leading role in promoting the use of alternative energy-powered vehicles.

Tailpipe emissions have come under scrutiny as China became the first country to report annual vehicle sales exceeding 20 million units last year.

To combat air pollution, China’s State Council, or cabinet, released a national plan in September that called for a 15 per cent to 25 per cent reduction in particulate matter by 2017 in the three key manufacturing regions anchored by Beijing, Shanghai and Guangzhou.

The government announced in September it would gradually decrease subsidies as it renewed its current program, which provides as much as 60,000 yuan ($9,900) toward the purchase of an all-electric passenger vehicle and as much as 500,000 yuan for an electric bus.

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