Chinese Electric Bus Companies Caught In Scandal

Sep 14, 2016 09:44 AM EDT | Irene Cabrera

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China's entire electric vehicle industry has been marred by scandal after it was reported that five companies were discovered to have collected millions of dollars in funding for buses they never created.

The Finance Ministry of China revealed that the five manufacturers were fined for dishonestly collecting more than one million yuan (or $120 million) in subsidies. Several Chinese news outlets are reporting that 20 more others might also be in trouble.

It added that 90 companies are currently under investigation but refused to identify the others. The government, meanwhile, did not imply whether or not the managers at the companies might be prosecuted, according to India Today.

"'Subsidy fraud' will do a lot of damage to development of the new energy vehicle industry," said Xu Yanhua, the deputy general secretary of the China Association of Automobile Manufacturers. The scandal has provoked questions about whether or not it will affect the financial ruling Communist Party is heavily spending on, according to Green Tech Media.

Last year, China had surpassed the United States as the largest electric vehicle market per units that have been sold, thanks to government funding. BYD Auto Ltd., one of China's biggest car manufacturers, surpassed Nissan and General Motors Inc. last year. However, it was not one of the five companies affected by the scandal.

The Finance Ministry said that Beijing had remunerated 33.4 billion yuan ($5 billion) in appropriations to several electric vehicles back in 2009 to 2015. Additionally, Shanghai and other cities waived license plate fees of up to 100,000 yuan ($15,000). These electric vehicle companies would also receive a rebate of 50,000 yuan ($7,500) per car and 500,000 yuan ($76,000) per bus.

Authorities have now been ordered to "tighten control" regarding the giving of subsidies to car manufacturing companies, a statement from the Cabinet read.

"Definitely, the government will keep a closer eye on this. I think it's a good thing. All the money can be used more properly. Companies that are real and invested money in R-and-D will benefit," said John Zeng of LMC Automotive Consulting, according to the Associated Press.

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