Analysis-China signals it will pull plug on subsidies for EVs with five-year plan exclusion

Core Insights - China is signaling a shift away from subsidies for the electric vehicle (EV) industry, indicating a move towards market-driven development after years of government support [1][2][4] Industry Development - The recent five-year development plan for 2026-2030 does not include electric vehicles as a strategic industry for the first time in over a decade, suggesting that the government views the industry as mature and capable of standing on its own [2][5] - The omission of EVs from the strategic list reflects a strategic decision to reallocate resources to other technologies amid global trade and security tensions [3][4] Market Dynamics - Analysts believe that the fading of electric vehicle subsidies will lead to a greater role for market forces in determining which companies survive in the industry [4] - China has established itself as the world's largest new energy vehicle (NEV) market, with NEVs accounting for over 50% of total auto sales by July 2024, significantly ahead of initial government targets [6] Supply Chain and Competition - The rapid growth of the EV sector has resulted in an oversupply, with many domestic brands producing more vehicles than the market can absorb, driven by production targets rather than consumer demand [7] - Research indicates that 93 out of 169 automakers in China hold market shares below 0.1%, highlighting the intense competition and potential for market consolidation [7]