ELECTRIVE — 2025-10-30
Automotive Industry
China has indicated it will phase out remaining support for its electric vehicle industry by excluding new energy vehicles (NEVs) from its list of strategic emerging industries in the next five-year plan. Analysts say the decision marks a shift towards market-driven growth.
The move comes after more than a decade of state subsidies and tax incentives that propelled China to become the world’s largest EV market. NEVs , including battery-electric, plug-in hybrid, and fuel cell vehicles, were previously listed as strategic industries in three consecutive five-year plans, unlocking billions in subsidies that supported both automakers and consumers. That policy fostered homegrown champions such as BYD and battery maker CATL.
However, it seems the industry can stand on its own two feet. In September, for example, 1.6 million NEVs were sold in China, reaching a market share of 49.7 per cent. That is a new record. Moreover, battery electric vehicles also claimed a new record, exceeding the one million mark (1,058,000 units) for the first time. And all that even though China ended its national EV purchase subsidy scheme in 2022 and plans to phase out purchase tax rebates by 2027.
With these figures in mind, analysts believe that Beijing considers the industry to be mature enough to do without subsidies and leave further development up to market forces.
“It’s an official acknowledgement that electric vehicles no longer need prioritised policies. Electric vehicle subsidies will fade,” Dan Wang, China director at consultancy Eurasia Group told Reuters. “China already dominates in EV-related tech and batteries, so there is no point prioritising it. It doesn’t mean the government will require capacity to be cut, but the market will play a bigger role in deciding who survives,” she added.
While an NEV industry mature enough to grow without government support is primarily positive, the news agency also points out the downside of subsidies. For instance, it contributed to overcapacity. Research by Jato Dynamics shows that 93 of China’s 169 carmakers have market shares below 0.1%, underscoring the industry’s fragmentation. And let’s not forget the special tariffs imposed on China-made EVs to compensate for government subsidies in China, saying the latter gave Chinese companies an unfair advantage over EV makers from Europe.
Reuters further reports that, while subsidies are being wound down, ministries are expected to introduce more targeted policies to guide future innovation.
A policy adviser quoted by Reuters said the exclusion “is not to say they’re not important — they absolutely are. Just look at our exports, the source of profits for the entire auto sector, the boost to the industrial chain, and our global leadership. NEVs are undoubtedly important.”
Also speaking to the news agency, analyst Shaochen Wang of Counterpoint concluded that success will depend on competitiveness: “Brands like BYD and Leapmotor have strengthened their cost advantages by enhancing supply chain integration capabilities and launched more cost-effective products; meanwhile, Xiaomi and brands under HIMA (Huawei Intelligent Mobility Alliance) have attracted consumers with their strong brand influence and leading intelligent features.”