China's generous government subsidies for electric vehicles and plug-in hybrids may be creating an unsustainable market for the vehicles, but the bubble hasn't burst yet.

 

Last month, automakers in China produced 16,095 EVs and plug-in hybrids, up 144 percent year on year. January sales have yet to be disclosed.

 

Automakers produced 7,952 passenger EVs, 4,887 plug-in hybrid passenger vehicles, 2,422 commercial EVs and 834 plug-in hybrid commercial vehicles, according to the Ministry of Industry and Information Technology. 

 

Only EVs, plug-in hybrids and fuel cell vehicles qualify for government subsidies. Conventional hybrids such as the Toyota Prius do not qualify.

 

Last year, combined sales of EVs and plug-in hybrids in China soared 340 percent to 331,092 vehicles.

 

But many companies have engaged in questionable business practices to qualify for subsidies. For example, some automakers inflated their sales by selling poorly made vehicles to "shell" companies, according to Chinese media reports.

 

Beijing has begun investigating reports of sales fraud.