China Will Pay Individuals to Drive an EV: Boost for NIO and Tesla?

Read The Full Article On: Marketrealist

China’s EV push got another boost. According to Xinhuanet, Beijing has launched a reward system for car owners to reduce emissions. On June 5, the Beijing Environmental Exchange launched this scheme. Usually, firms trade carbon emission allowances. Tesla (NASDAQ:TSLA) sold regulatory credits worth $354 million in the first quarter, as reported by Electrek.

Rewarding car owners for driving an EV or not driving

While China’s scheme focuses on individuals, Electrek reported that it isn’t entirely novel. In fact, Metro Mile and other insurance providers in the US already offer similar programs. They use connected devices to monitor driving. However, instead of just reducing customers’ insurance bills, China’s scheme will also pay them to drive zero-emission vehicles or not to drive at all.

EV emissions are lower than combustion engine vehicles

Xinhuanet reported that Wang Huijun, the executive vice president of the exchange, said, “The average daily carbon dioxide emissions for an electric vehicle is 0.83 kg, while a fuel-powered vehicle with an engine of no more than 1.2 liters discharges 2.58 kg of carbon dioxide on average daily.” He also said that a driver can help cut carbon emissions by 1 ton if he doesn’t drive for 200 days over a three-year period.

China’s aggressive EV push

While individuals might earn less than a dollar a day, the amount will accumulate to a few hundred dollars or more over a year. Essentially, the payment should incentivize people to drive EV cars. China wants to aggressively reduce pollution and cut its oil imports. The country will prioritize EVs in this push. The country has extended the subsidies on buying NEVs by two years to 2022. China’s battery charging infrastructure also got an injection of 2.7 billion yuan, which implies an increase of 10x compared to last year.

EV industry is part of China’s strategic initiatives

The EV industry is part of the Chinese government’s strategic initiatives. China aims to increase the share of EV vehicles in the overall auto market to 25% from 5% in 2019. Along with these measures and the latest reward scheme, there are a lot of opportunities for EV makers in China.

NIO and China’s EV opportunity

Competitive EV makers should benefit from this push. NIO (NYSE:NIO) is one of the domestic EV companies that China wants to succeed. China has already made an exception for NIO with EV subsidies. A threshold of 300,000 yuan is set for EVs to get a subsidy. Notably, Tesla had to reduce its Model 3 prices to receive the subsidy.

China supports NIO

However, the exception is for EVs that cost more than this limit if they have battery swap technology. NIO is the only brand that qualifies for this incentive. NIO’s fundamentals are improving, which could strengthen its reach in the domestic market. Notably, the company sold record vehicles in May.

NIO and Tesla will take advantage of the EV opportunity

Chinese authorities helped Tesla set up its plant in Shanghai. Read China Did for Tesla What Trump Didn’t to learn more. Tesla also sold record Model 3 cars in China in May. Overall, NIO and Tesla seem ready to take advantage of China’s aggressive EV push.

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