BYD, Chery caught in $185m Chinese EV subsidy scandal

It was one of the world’s most ambitious electric vehicle plans until a government investigation revealed just how easy it was to rort the system.

Two of China’s largest electric vehicle manufacturers, BYD and Chery, have been caught up in a multimillion-dollar subsidy scandal after a government audit revealed they improperly claimed more than $80 million in taxpayer funds.

China’s Ministry of Industry and Information Technology, shows that from 2016 to 2020, the automakers received public subsidies for more than 13,000 vehicles that failed to meet official requirements.

Preliminary results published late last month show Chery had applied for approximately 240 million yuan (approximately AUD $51 million) in funding for 8,760 electric and hybrid vehicles that did not qualify.

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BYD electric cars waiting to be loaded to the car carrier BYD "Shenzhen", which will sail to Brazil from the Taicang Port in Suzhou, in China’s eastern Jiangsu province. (Photo by AFP) / China OUT

BYD had 4,973,143 million yuan (approximately AUD $30 million).

Both car brands accounted for close to 60 per cent of the total improper claims.

The audit assessed more than 75,000 vehicles from more than a dozen automakers.

In total, more than 21,700 vehicles across multiple brands were deemed ineligible accounting for 864.9 million yuan (approximately AUD $185 million) in questionable subsidies.

No formal allegations of fraud have been made but the audit did flag issues such as missing supporting documents and failure to meet minimum mileage thresholds required under the phased out EV incentive scheme.

Under the subsidy program, the Chinese government had previously offered generous cash rebates of up to 60,000 yuan (AUD $8400) per electric or plug-in hybrid vehicle, paid directly to manufacturers, who were supposed to pass on the subsidy to their customers as a discount on the purchase price.

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Chery had applied for approximately 240 million yuan (approximately AUD $51 million) in funding for 8,760 electric and hybrid vehicles that did not qualify. Picture: Supplied

However, this did not always happen correctly.

Regulators were particularly sceptical of dealer practices and sales strategies, calling out “zero kilometre used cars”, brand new vehicles registered to dealers and resold as used stock to inflate sales figures.

The Ministry has not confirmed whether any of the funds flagged in the audit have been repaired or deducted from future payments.

Chery denied the allegations and has said it acted transparently and said the audit only involved subsidy applications that had not yet been paid out.

BYD has not yet commented.