Chinese EV Maker Chery Denies Allegations of Inappropriate Subsidies Amid Government Audit
- What Sparked the Subsidy Controversy?
- How Did Chery Respond?
- BYD’s Silence and Industry Implications
- Financial and Policy Fallout
- Historical Context: China’s EV Subsidy Journey
- What’s Next for Chery and BYD?
- FAQs
In a fiery rebuttal, Chinese electric vehicle (EV) manufacturer Chery has dismissed claims of improperly claiming government subsidies, following an audit by the Ministry of Industry and Information Technology (MIIT). The audit flagged 21,725 vehicles from Chery and BYD as ineligible for subsidies totaling $53 million, citing missing documentation or mileage discrepancies. Chery insists it acted transparently, while BYD remains silent. The fallout highlights broader challenges in China’s EV sector, including overcapacity and pricing wars. ---
What Sparked the Subsidy Controversy?
The MIIT audit, conducted earlier this year, scrutinized EV subsidies claimed between 2015 and 2020. It found that Chery and BYD collectively received $53 million for vehicles that either lacked proper sales certificates or failed to meet mileage thresholds. Chery accounted for 7,663 disqualified vehicles—primarily due to missing paperwork—while BYD had 4,973. Notably, the government hasn’t accused either company of fraud, but past precedents suggest manufacturers might need to repay subsidies for non-compliant vehicles.
How Did Chery Respond?
Chery defended its actions, stating it proactively reported discrepancies to authorities. “We disclosed missing certificates honestly; there was no fraudulent intent,” the company asserted. It emphasized that the audit only addressed unpaid subsidy claims, implying no refunds were required. Analysts speculate this could soften the financial blow for Chery, which, like its peers, faces profit pressures from China’s cutthroat EV price wars.
BYD’s Silence and Industry Implications
BYD, China’s EV leader, hasn’t commented, leaving room for speculation. The audit’s timing is critical: China’s EV sales have outpaced gasoline cars monthly since March 2023, fueled by subsidies from 2009–2022. However, the sector now grapples with overcapacity and strained supplier relations. Local governments are ramping up audits for 2021–2022, signaling tighter oversight.
Financial and Policy Fallout
The $121 million in flagged subsidies underscores the risks of China’s subsidy-driven growth model. While Chery dodges immediate penalties, the incident may prompt stricter regulations. “Subsidy clawbacks could dent margins,” notes a BTCC market analyst. “But long-term, it’s a step toward sustainable growth.” The government has pledged to curb overcapacity and price manipulation, though details remain vague.
Historical Context: China’s EV Subsidy Journey
China’s EV subsidies, launched in 2009, turbocharged adoption but invited scrutiny. By 2022, the program phased out, leaving manufacturers to navigate market forces. The Chery-BYD audit reflects growing pains as the industry matures. “Policymakers want to weed out inefficiencies,” says an industry insider. “But abrupt changes risk destabilizing players.”
What’s Next for Chery and BYD?
Both companies must balance transparency with profitability. For Chery, the audit’s limited scope offers respite. BYD’s silence, however, fuels uncertainty. Investors will watch for MIIT’s next moves—and whether other automakers face similar reviews.
---FAQs
Why were Chery and BYD’s subsidies audited?
The MIIT audit targeted improper subsidy claims for 21,725 EVs sold between 2015–2020, citing missing documents or unmet mileage rules.
Will Chery repay the subsidies?
Chery claims the audit only involved unpaid claims, suggesting no repayments. Historically, manufacturers refunded subsidies for non-compliant vehicles.
How does this affect China’s EV market?
Tighter audits may curb overcapacity and price wars but could strain automakers’ finances during a fragile recovery.