A sign directing traffic to a public electric vehicle charging station in Beijing, China (Photographer: Qilai Shen/Bloomberg)  

China Verifying More EV Funding Wrongdoing, Automaker Group Says

(Bloomberg) -- China is verifying information gathered during its investigation into abuses of electric-vehicle subsidies to identify wrongdoing, according to the state-backed automakers group, a process that could widen the scope of the crackdown into the fast-growing industry.

The finance ministry identified five manufacturers of electric vehicles for scamming the government of about $150 million in subsidies, citing them as “classic cases” unearthed in a probe into 90 major new-energy vehicle makers covering 401,000 vehicles. The nine-month investigation found instances where subsidies were claimed for unsold vehicles, automobiles left idle after companies received payouts and outright fabrication of sales and documentation, according to a statement by the finance ministry on Thursday.

“So far, the finance ministry has released one name list,” Xu Yanhua, a deputy secretary general at the China Association of Automobile Manufacturers, said at a briefing in Beijing. “The offenders identified yesterday committed funding fraud. There are also other types of wrongdoing due to various breaches of policies. The other names aren’t officially released, so I can’t comment on it.”

New-energy vehicles, which China defines as electric vehicles, plug-in hybrids and fuel-cell vehicles, were identified in 2010 as a strategic emerging industry that merits state support. The central government needs EVs to take off for it to meet the long-term goal of reducing its dependence on imported crude oil. For the auto industry, the zero-emission vehicles are required to help automakers meet stringent fuel-economy and emission standards due to kick in over the next few years.

Faked Documents

Gemsea Coach, a Suzhou, China-based bus maker, had its production license revoked and ordered to pay back all of its subsidies received last year. The company faked documents to illegally get 261.6 million yuan ($39 million) in financial assistance for 1,131 vehicles, according to the finance ministry. Another four companies -- Chery Wanda Bus, Shenzhen Wuzhoulong Motors Group, Higer Bus Co. and Shaolin Bus -- were fined 50 percent of the amount of subsidies they received in addition to the clawback of financial aid.

The fraudulent behavior has undermined the implementation of policies and hurt the development of the new-energy vehicle industry, Xu said. The finance ministry said on Thursday it will work with relevant agencies to “accelerate the refinement of support policies, raise the qualification bar to encourage advances in technology, and phase out subsidies at the appropriate time to help the new-energy vehicle industry quickly enter a stage of healthy self-development.”

From 2009 to 2015, the central government disbursed a total of 33.4 billion yuan ($5 billion) in subsidies to support the purchases of these automobiles. China surpassed the U.S. as the largest market in the world for electric vehicle sales last year.

“Everyone knows it can’t be just these five companies,” said Zhou Jincheng, an auto industry analyst at Fourin Inc. in Nagoya, Japan. “The government is concerned that if they cast the net too wide, the repercussion may be too big and strangle the industry.”

With assistance from Yan Zhang, Tian Ying, Ma Jie