China’s industry regulator found that carmakers including BYD Co. and Chery Automobile Co. claimed electric vehicle subsidies they did not actually qualify for during the five years that started in 2016. The amounts came to more than 864 million yuan (S$154 million) .

Chery, the nation’s largest car exporter, was found to have applied for some 240 million yuan of funding for around 8,760 EVs and hybrids that did not qualify, while 143 million yuan for roughly 4,900 cars BYD sold were removed from the ledger, according to preliminary results published by the Ministry of Industry and Information Technology (Miit) late in June .

The audit of the EV subsidy program between 2016 and 2020 was carried out across China earlier this year.

In Henan province, for example, a sample of 292 vehicles involving funding of 475 million yuan was assessed, according to a document published by the local government.

It was not immediately clear if the companies are required to return the subsidies or if authorities have already deducted the excess amounts from payments to the manufacturers. Representatives for BYD and Chery did not immediately respond to requests for comment.

Beijing is intensifying scrutiny of the auto industry, whose more than two-years long price war has started to impact the bottom lines of companies across the supply chain and raise concerns the quality and reputation of Chinese-made cars could be damaged.

Some of the reasons for disqualifying the EVs in the audit included the manufacturer being unable to provide operational data for the cars, or their mileage did not meet requirements, according to documents released by the Miit. 

Automakers, under pressure to meet sales targets, are sometimes offloading new vehicles to traders or dealers in bulk, who then help register the vehicles so the companies can book them as sales. Then the essentially brand new cars end up on the second-hand market, becoming “zero-mileage used cars”.

China’s Ministry of Commerce has also convened a meeting to address this issue, and consumption subsidies in some parts of China have been paused to investigate whether dealers have used these cars to fraudulently claim rebates. 

China carried out a decade-long national subsidy program to promote EVs and hybrids starting in the early 2010s, offering up to 60,000 yuan per car. The rebate was paid in bulk to manufacturers, which would then discount the retail price for customers.

The system provided opportunities for scams – in 2016, a People’s Daily report cited estimates that dozens of companies had fraudulently claimed about 9.3 billion yuan in subsidies. 

Authorities have conducted audits in the past on the national EV subsidy program but usually on a far smaller scale.

An audit completed in 2022 only involved a handful of carmakers and hundreds of cars. This year’s audit assessed dozens of automakers and more than 75,000 vehicles. BLOOMBERG

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