Xpeng's three currently available models, the G3i, P5 and P7, will have their purchase benefits reduced by about half.

(Image credit: Xpeng)

Xpeng Motors is the latest to take action after Tesla and Nio as China's subsidies for new energy vehicle (NEV) purchases are set to shrink next year.

Rumors have recently surfaced that Xpeng's three currently available models, the G3i, P5 and P7, will have their purchase benefits for customers cut by about half. Auto-time on Tuesday cited sources at the company as confirming that the rumors are true.

Starting December 13, new customers will see a reduction in both the purchase benefits package and the purchase loan benefits after placing an order, the report said, citing salespeople at Xpeng stores.

Xpeng's package for P7 buyers will be reduced by RMB 5,000-10,000, P5 by RMB 4,000 and G3i by RMB 5,000, and most models will no longer offer 0-interest or low-interest loan packages, according to the report.

(Image credit: Auto-time)

The move is likely due to pressure from rising supply chain prices and is also related to the further rollback of China's NEV subsidies in 2022, the report said, citing industry sources.

China's Ministry of Finance released plans on April 23, 2020, for the country's subsidies for NEVs to be scaled back each year, calling for the amount of subsidies to be reduced by 10 percent, 20 percent and 30 percent each year from 2020-2022, respectively, from the previous year.

The subsidies available to car buyers are based on when new cars get their license plates, which means that the amount of state subsidies available to consumers who get deliveries next year will be 30 percent less than in 2021.

The plan also mentions that from 2020, the pre-subsidy selling price of new energy passenger cars must be below RMB 300,000 (including 300,000 yuan) to enjoy the subsidy.

However, in order to encourage the development of battery swap as a new business model, vehicles supporting battery swap are not subject to this requirement. Therefore, even though the starting price of all Nio models is higher than RMB 300,000, consumers can still enjoy the national subsidy.

With the expected reduction in state subsidies coming next year, Tesla already took action at the end of last month by raising the price of the entry-level China-made Model 3 and Model Y.

On December 1, Nio announced its subsidy program for consumers who purchased their vehicles this month, allowing owners who placed orders this year but will not receive delivery until early next year to continue to receive the current subsidy amount.

Those who pay a deposit for the ES8, ES6 and EC6 by December 31, 2021, and receive delivery by March 31, 2022, will be eligible for the subsidy at the Chinese state subsidy rate for 2021, Nio said in a statement posted on its app.

For Xpeng, while it offers a fixed price for all models, it also offers an entitlement package for car buyers, which indirectly provides discounts.

Xpeng first introduced the purchase benefit package when the P7 launched in April 2020, when owners who paid a deposit received RMB 16,000 that they could use to pay for optional features or be put into an account to be used as credits.

After these benefits are scaled back, future buyers will need to pay for these additional options if they want them.

Notably, this is not the first time Xpeng has reduced the benefits it offers to its customers, as the company reduced the amount of free charging it offers to owners from 3,000 kilowatt-hours to 1,000 kilowatt-hours per year starting from August 1.

As Xpeng customers continue to expand, the reduction in free charging credits is intended to ensure that the Xpeng supercharging system can provide better and more sustainable replenishment services for customers, the company said at the time.

For Xpeng, the moves seem natural at a time when its models are highly popular and are expected to help boost its vehicle margins.

It delivered a record 15,613 units in November, meeting the company's previously mentioned target of 15,000.