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China's local governments are likely to reintroduce cash subsidies to bolster sales of electric vehicles (EVs) after the industry took a savage hit from the Covid-19 outbreak, said analysts.
Provincial-level governments may distribute billions of yuan to buyers of battery-powered cars in the coming months after southern China's Guangdong province spearheaded the move last week to support battered automotive companies.
"Cash subsidies can give carmakers a shot in the arm and generate multi-billion-yuan sales," said David Zhang, a researcher at the North China University of Technology. "Lockdown measures have caused severe damage to the once buoyant sector and it is necessary to spur sales of EVs through strong incentives."
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Local governments had previously offered cash incentives to buyers but were ordered by Beijing to stop doing so in 2019.
In the last two months lockdowns in Shanghai, mainland China's motor industry hub, and Changchun, the capital of northeastern China's Jilin province, exacerbated automotive supply chain bottlenecks and deterred consumers from buying electric cars, threatening to knock the sector off its feet.
Sources at car manufacturers and dealers said they are lobbying local governments to follow Guangdong's move.
Guangdong's government announced at the weekend that consumers who buy a new electric car to replace another vehicle will receive a subsidy of 10,000 yuan (US$1,513) in May and June. Those buying a petrol car will be awarded 5,000 yuan, as the government aims to support the entire industry.
The EV sector, a new bright spot in the mainland's economy, bolstered by efforts to achieve carbon neutrality by 2060, has emerged as a backbone industry in some provinces.
Analysts said that Jilin and local authorities in East China's Yangtze River Delta, such as Shanghai, Jiangsu and Zhejiang will probably grant cash subsidies to promote sales of EVs.
In Shanghai alone, Tesla's massive Gigafactory 3 lost about 50,000 vehicles in production as the assembly line sat idle between March 28 and April 18.
Deliveries of smart electric cars from China's three biggest Tesla rivals - Nio, Xpeng and Li Auto - halved in April.
The vehicle industry is one of the mainland's biggest employers, providing jobs for one in every six of its workforce of 800 million people, according to analysts' estimates.