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Carmaker BYD Co has vowed to scale up its output of new energy vehicles to cut costs, as the government gradually phases out subsidies for green energy vehicles.
The company will also boost its production of new energy vehicle batteries in order to lower production costs, it said.
The battery remains the key component of a new energy vehicle, accounting for 30 to 40 percent of its total production cost.
Considering the government's subsidy for new energy vehicles will decrease by 20 percent in 2017, the company has to cut its costs by 5 to 10 percent to compensate for this.
According to the Ministry of Finance, China will reduce the 2017-18 subsidies for new energy vehicles by 20 percent from those granted in 2016, and further cut them by 40 percent in the 2019-20 period.
All subsidies will be phased out after 2020, it said.
China started offering subsidies to boost the production of clean energy vehicles in 2009, and 33.4 billion yuan ($4.81 billion) had been earmarked by the end of 2015, said the ministry.
However, the one-size-fits-all subsidy has made some carmakers rely too heavily on the government's financial stimulus, and they are reluctant to invest in research and development, with some manufacturers even taking subsidies as a source of quick money.
According to BYD, the company has been preparing for the end of the subsidies.
It recently signed up US movie star Leonardo DiCaprio as the brand ambassador for its new energy vehicles, who will work with the brand over the course of 2017.
Ex-Alfa Romeo and Audi design chief Wolfgang Egger has been hired to take charge of the vehicles' interior and exterior design.
Zhang Zhiyong, an auto analyst based in Beijing, said ending the subsidies will have an overall beneficial effect on the industry, as it will drive out those just seeking to make a quick buck.
According to Chen Qingtai, director of China EV100, a nonprofit organization dedicated to promoting new energy vehicles, Chinese carmakers should focus on research and development to make themselves more competitive, as international rivals are coming up with an increasing number of products.
SAIC Motor said it would raise another 15 billion yuan for research and development of new energy vehicles, while Volkswagen AG also plans to introduce around 10 electric car models based on its electric-only Modular Electric Model lineup to the Chinese market over 10 years.
Chinese green vehicle producers Geely Automobile Holdings Ltd and Chery Automobile Co Ltd also said earlier they would focus on the research and development of electric vehicles over the next decade.
zhengxin@chinadaily.com.cn
