A NextEV Nio EP9 electric supercar is on display during an automobile exhibition in Beijing. Nio's ES8, launched over the weekend hopes its low price will attract customers away from Tesla. Photo: AFP

Chinese authorities will completely phase out local government subsidies for domestic electric car producers as early as next year, Chinese business news outlet Caixin reports, citing sources close to policy makers.

The decision to scale back local government expenditures will not effect subsidies provided by the central government.

Subsidies are based on vehicle performance, with cars capable of running 250 km on a single charge entitled to 44,000 yuan (US$6,653) worth of funding from the central government. Under the current program, according to Bloomberg, local governments are limited to providing additional subsidies upwards of 50% of the central government amount.

China’s Nio ES8 set to take on Tesla

In related news, Chinese e-car startup Nio launched its ES8 over the weekend, retailing at half the price of Tesla’s Model X. CNBC cited the advantage Nio gains from government subsidies when it reported the ES8’s starting price of US$67,765 – which compares to the Model X’s US$126,470 price inside China.

“It’s hard to assume” how this will affect Tesla’s sales in China, Nio Founder and Chairman William Li told CNBC over the weekend. “Maybe Tesla will sell less … after our product is out. Or probably, because the whole market is growing, they will still maintain growth in sales. It’s hard to say.”

“But we do have lots of customers that turned to us from Tesla, and many who have bought buy products from both,” said Li, who spoke to CNBC on the sidelines of the ES8 launch event.

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