Beijing to phase out EV subsidies in upcoming five-year plan

China has abandoned EV subsidies for the first time in over a decade, following the industry’s exclusion from the top policymakers’ five-year development plan for 2026-2030. The government’s support has fueled a boom that has left China struggling with an oversupply of EVs, prompting it to seek alternative global markets.  

Dan Wang, China director at Eurasia Group, said the exclusion of EVs from the next five-year development plan is an official acknowledgment that they no longer need prioritized policies. She emphasized that China has already dominated the EV and battery markets, so there is no point in prioritizing them, adding that EV subsidies will likely fade. Wang says the market will now determine who survives from here on out. Research firm Jato Dynamics noted that 93 of the 169 automakers operating in China have market shares below 0.1%.

Cryptopolitan reported that China’s EV companies are expanding abroad amid domestic price wars that have bankrupted startups and crushed profits. The government launched an anti-innovation campaign targeting excessive, self-defeating competition, but nothing much has changed on the ground. However, automakers have found workarounds, offering free upgrades, skipping the obvious price cuts to avoid government attention, and launching cheaper models.

Dingshu expects policymakers to take more targeted measures

The secretary-general of China’s Passenger Car Association, Cui Dongshu, stated that the current plan suggests Chinese policymakers will adopt more targeted measures compared to the previous broad approach. He believes this will help wean the industry off government support. However, this official shift means that EV automakers must face the reality that their futures will be decided by market competition.

Dongshu expects the policymakers to press EV makers to focus more on curbing the production of lower-quality cars and delivering more innovative products. However, Shaochen Wang, a research analyst at Counterpoint, believes that automakers will need to sufficiently build their core strengths to establish proper footholds in the Chinese market.

“For instance, 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.” 

–Shaochen Wang, Research Analyst at Counterpoint

A Chinese policy adviser, who requested anonymity, also said that excluding EVs from government support does not mean the industry is no longer important. Tu Xinquan, Dean and Professor of the China Institute for WTO Studies of the University of International Business and Economics, expects China’s state planner and industry ministry to announce more specific plans to guide the industry’s future.

Policymakers say EV exclusion is part of their years-long plan 

Chinese policymakers reportedly said that their ultimate intention was for the EV industry to stand independently, adding that they have been gradually phasing out major subsidies and tax breaks for the NEV (New Energy Vehicle) sector. They mentioned that the Chinese government ended a national purchase subsidy program for EV consumers in 2022 and intends to phase out tax rebates for purchases by 2027. However, some of the country’s auto industry associations are lobbying for the purchase tax rebates to be phased out at a gentler pace. 

Chinese President Xi Jinping reportedly reiterated the importance of avoiding rushed developments in the EV sector and investing in the same new productive forces. He asserted that his government aims to guide all concerned parties to adopt a realistic, sound, and rational approach in their initiatives. Xi also questioned earlier this year whether every province needs to develop industries like EVs and AI.

Meanwhile, the 15th Five-Year Plan prioritizes biomanufacturing, nuclear fusion, quantum technology, and hydrogen energy as the new drivers of China’s economic growth. The complete plan is expected to be released at a parliamentary meeting in March 2026. 

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