Market Reaction And Risk Of Price Subsidy

Price-subsidies are implemented to achieve social and economic goals as well as correcting market distortion such as compulsory education and tariff.However,while achieving their designed goals,price-subsidies can be costly in terms of government budget burden and market efficiency loss.Although the impacts of price subsidies have been constantly the focus of many scholars and researchers,few have realized that it may also cause financial risks.In order to encourage the development of new energy vehicle industry,the Chinese government has issued multiple industrial policies.Among them,the price subsidy policy has been implemented nationwide since 2016.According to the ministry of industry and information technology,the total amount of liquidate subsidy funds for the promotion and application of energy vehicles from 2016 to 2019 is ￥101.51 billion.With the development of new energy vehicle industry,the government’s financial burden has increased,enterprises rely too much on subsidies and even cheat subsidies,and invest blindly.Due to the low maintenance rate of new energy vehicles,with the increase of market share of new energy vehicles,the overall risk of automobile consumer finance will also rise.Using the change of China’s new energy vehicle price subsidy standard in 2020,this paper evaluates the implementation effect of the price subsidy,and estimates the financial risk brought by the price subsidy through the quantitative analysis results.Using the national sales data of new energy vehicles in 2020 and the double difference method,the policy change is divided into transition stage and full implementation,and the subsidy changes and unchanged models are compared.The results show that the subsidy withdrawal during the full implementation has significantly reduced the monthly average national sales of new energy vehicles with each model code from 97 to 267,however,during the transition stage,the reduction of subsidies did not reduce the sales volume,but showed signs of increase.This paper considered that this "rising instead of falling" may be caused by oversold behavior of new energy vehicle enterprises in transition stage.In order to verify this view,this paper studies and compares two types of vehicles with reduced subsidies and withdrawal of subsidies.The results show that the latter dominates "not falling but rising".This paper also finds that the effect of price subsidy policy is heterogeneous.The analysis found that the decline and rise in sales were driven by models with sale price less than ￥500,000 and more than ￥500,000 respectively.Finally,the research preliminarily estimates the increment of bad auto loans brought by price subsidies.The results show that the amount of bad loans caused by China’s new energy vehicle price subsidy policy in 2020 is between ￥760 million and ￥2.09 billion.The existing literature on the impact of price subsidy policy on the development of new energy vehicle industry mainly focuses on three directions:one is the multiparty game of market participants,the other is the impact on consumers’ purchase intention and perception,and the third is the research on regions and enterprises,mainly focusing on R&D and production behavior.This paper directly estimates the market impact and financial risk caused by China’s new energy vehicle price subsidy policy for the first time.On the one hand,it fills the research gap and enriches the existing literature system to a certain extent.On the other hand,this paper also provides an important reference for policymakers to formulate or improve price subsidy policies in the future.