Chery Loses $53 Million in Subsidies After Audit Disqualifies 7,663 Vehicles

Chinese electric vehicle (EV) manufacturer Chery has strongly denied allegations of improperly claiming government subsidies. The Ministry of Industry and Information Technology conducted an audit that disqualified $53 million in subsidy claims for vehicles sold between 2015 and 2020. Chery, along with another major EV maker, was found to have discrepancies in their subsidy claims, leading to the disqualification of thousands of vehicles.

Chery has maintained that it has truthfully reported the situation to authorities and has not engaged in any fraudulent activities. The company acknowledged that some sales records were incomplete due to their age, but emphasized that it had not intentionally misrepresented any information. The audit, which took place earlier this year, disqualified a total of 21,725 vehicles, with Chery responsible for 7,663 of these. Most of Chery's disqualified vehicles were due to missing certificates rather than mileage issues.

The government has not accused any of the companies of fraud, and the audit document did not specify any penalties or reimbursements as a result of the disqualification. However, past policies suggest that vehicle makers may have to repay subsidies for vehicles that failed to meet mileage standards. Chery clarified that the audit only covered unpaid subsidy claims, meaning that no repayments were necessary. The other EV maker involved in the audit has yet to respond to the allegations.

The allegations come at a time when China's EV industry is facing significant challenges, including a fierce price war that is affecting profitability. The industry has also been dealing with excess capacity and tensions between dealers, suppliers, and manufacturers. Top leaders in the country have promised to address these issues by increasing regulations on pricing and supporting the orderly phasing out of outdated production capacity.

China has been providing generous subsidies for new energy vehicles since 2009 to promote the adoption of electric vehicles. These efforts have been successful, with electric vehicle sales surpassing gasoline-powered car sales every month since March. The ministry report includes audits by local governments, which are now carrying out more audits for 2021 and 2022. The industry is expected to continue to face scrutiny as the government seeks to ensure that subsidies are being used appropriately and that the industry is operating in a sustainable manner.