China electric vehicle recharging station Copyright Feng Li, Getty Images

An electric vehicle arrives at China's largest electric vehicle battery recharging station in Beijing, China. China punished five manufacturers of electric vehicles for scamming the government of about $150 million in subsidies.

Phantom Sales, Faked Papers Found in China Auto Subsidy Probe

The announcement may pave the way for the government to resume paying out subsidies to electric vehicle makers, which stopped receiving financial assistance as a result of the investigation.

China punished five manufacturers of electric vehicles for scamming the government of about $150 million in subsidies in a crackdown aimed at rooting out fraud in the fast-growing industry.

The government revoked the production license of Gemsea Coach, a Suzhou, China-based bus maker, and ordered the company to pay back all of the subsidies it received last year, according to a statement from the Ministry of Finance on Thursday. The company faked documents to illegally receive 261.6 million yuan (US$39 million) in financial assistance for 1,131 vehicles, the ministry said.

Another four companies -- Chery Wanda Bus, Shenzhen Wuzhoulong Motors Group, Higer Bus Co. and Shaolin Bus -- were fined 50% of the amount of subsidies they received in addition to the clawback of financial aid, according to the statement.

The five companies were highlighted by the government as being “classic cases” unearthed in its probe into the sector, which involved investigations into 90 major new-energy vehicle makers covering 401,000 vehicles. The probe found instances where subsidies were claimed for unsold vehicles and others where automobiles were left idle after companies received payouts.

The announcement may pave the way for the government to resume paying out subsidies to electric vehicle makers, which stopped receiving financial assistance this year as a result of the investigation. That would be positive for companies such as Anhui Jianghuai Automobile Co., which would be unprofitable if not for government subsidies.

The central government disbursed a total of 33.4 billion yuan in subsidies from 2009 to 2015 to support the purchases of these automobiles, in the process propelling China past the U.S. as the world’s biggest electric vehicle market. The generous state support and the promise of coveted new licenses to manufacture EVs have combined to cultivate a gold-rush mentality, prompting concerns the industry is plagued by too many me-too companies that lack the technology to measure up to global standards.

By Bloomberg News

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