Chery and BYD Under Scrutiny: How $53M in EV Subsidy Claims Sparked a Government Audit

• What Triggered the Subsidy Audit?
• How Did Chery Respond to the Allegations?
• Why Does This Audit Matter for China’s EV Industry?
• What’s Next for Subsidy Policies?
• FAQs

Summary China’s electric vehicle (EV) sector faces turbulence as Chery and BYD grapple with allegations of improper subsidy claims. A recent audit by the Ministry of Industry and Information Technology (MIIT) flagged $53 million in disputed payouts for 21,725 vehicles sold between 2015 and 2020. While Chery denies wrongdoing—citing "missing receipts" and "truthful reporting"—the incident highlights broader challenges in China’s EV subsidy framework. As the industry battles overcapacity and price wars, regulators vow tighter oversight. Here’s what you need to know. ---

What Triggered the Subsidy Audit?

The MIIT’s audit, conducted earlier this year, uncovered discrepancies in subsidy declarations for 21,725 EVs sold by Chery and BYD. Missing documentation (like end-sale certificates) and mileage shortfalls disqualified claims totaling $121 million, with Chery and BYD accounting for 60% ($53 million) of the flagged amount. Notably, 7,663 of Chery’s vehicles were rejected—primarily due to paperwork gaps rather than mileage failures. BYD saw 4,973 vehicles disqualified. The government hasn’t alleged fraud, but past policies required repayments for unmet mileage standards. Chery insists no repayments are needed, as the audit targeted "unpaid claims."

How Did Chery Respond to the Allegations?

Chery’s statement struck a defensive tone: "We truthfully reported missing certificates; there’s no fraud." The automaker blamed aging sales records for incomplete receipts and emphasized collaboration with authorities. BYD, however, remains silent—a curious MOVE for China’s EV leader. Industry analysts speculate whether this reflects confidence or caution. "Subsidy audits are messy," notes a BTCC market analyst. "Missing paperwork is common, but the scale here raises eyebrows."

Why Does This Audit Matter for China’s EV Industry?

China’s EV sector is at a crossroads. Generous subsidies (2009–2022) fueled explosive growth, with EVs outselling gas cars monthly since March 2023. But the policy’s success bred challenges: overcapacity, price wars, and now, subsidy disputes. The MIIT audit signals tighter scrutiny as Beijing aims to "phase out outdated capacity." For context, the $53 million in disputed claims could cover 1,000+ mid-range EVs—a drop in the bucket for BYD’s $86 billion revenue but a reputational risk.

What’s Next for Subsidy Policies?

Local governments are expanding audits for 2021–2022, suggesting stricter enforcement ahead. While the MIIT hasn’t mandated repayments, historical precedent (e.g., 2017’s subsidy clawbacks) looms. "The goal isn’t to punish but to correct," says a TradingView industry report. Meanwhile, automakers face a balancing act: leveraging subsidies while avoiding compliance traps. For consumers, tighter rules may slow price cuts but ensure long-term market stability.

---

FAQs

Did Chery commit fraud with EV subsidies?

No evidence suggests fraud. Chery attributes discrepancies to outdated record-keeping and missing certificates, not intentional misconduct.

How much must Chery and BYD repay?

As of now, nothing. The audit targeted unpaid claims, though past policies required repayments for mileage failures.

Will this affect EV prices in China?

Unlikely immediately, but stricter audits could reduce subsidy-driven price cuts long-term.