SHANGHAI, (Reuters) – China has been in discussions with three sources about extending expensive subsidies to electric cars (EVs) to China. The subsidy was set to end in 2022 and aims to maintain a vital market growth as the economy slows.

This decision by policymakers is coming as the second largest economy in the world has slowed down sharply. Auto sales have also slowed after Shanghai and other cities imposed strict COVID-19 lockdowns starting March. This has resulted in stores being closed, supply chains disrupted, and spending cuts, even on new houses.

People familiar with the situation said that government departments such as the Ministry of Information and Industrial Technology are looking into whether they will continue to provide subsidies for EV buyers until 2023.

China’s high-end incentive program is credited for creating the largest EV marketplace in the world. According to Shi Ji (an auto analyst at China Merchants Bank International), around 100 billion Yuan ($14.81 trillion) have been given to purchasers, including fleet operators, since the subsidy began in 2009.

They said that the terms of the extension for 2023, which includes the amount and eligibility of vehicles, are not yet finalised.

Subsidies are available for all automobile manufacturers, even non-Chinese ones like Tesla (NASDAQ:), an international automaker which owns a Shanghai factory and has the top-selling electric vehicle.

On Wednesday, the MIIT and Ministry of Finance did not immediately reply to inquiries for comment.

Originally, the EV subsidy program was to be eliminated by 2020. However, Beijing has extended it for two more years in order to stimulate demand following the COVID pandemic.

As demand grew and manufacturing costs dropped, the government reduced subsidies for vehicles. The subsidy paid for plug-in hybrids with more than 300 km range was reduced by 20% to $1,900.

EVS FOR $4,000.

China’s incentive program for new-energy vehicle purchases (NEV), has stimulated the buying of long-range cars, in part because the subsidy threshold has been raised over time.

According to JATO auto consulting, 40% of EVs sold in China are battery-powered, city-cars. Most of these cars don’t receive subsidies and average less than $4,000. This compares to more than $26,000 for comparable models in the United States.

Subsidies now target larger models with more than 300 km per charge. They are priced below 300,000 Yuan (or $44,459).

According to China Association of Automobile Manufacturers data, China saw a 45% increase in NEV sales year-on-year during April. However, this was slower than the growth seen in April last year when NEV sales increased more than twice as fast.

It has predicted that demand and production will begin to catch up after April’s bottom, which was caused by the partial or full COVID lockdown in many Chinese cities.

Guangdong, Chongqing and other local governments have also implemented stimulus measures in order to help consumers exchange old combustion engines for new electric vehicles.

China Securities Journal, the state-owned newspaper in China, published a report on Tuesday stating that government officials will introduce subsidies starting June. This is to encourage rural buyers to buy cars and NEVs. The payouts can reach up to $5,000 ($740/vehicle).

Shanghai’s municipal governments are also looking into ways they can boost spending, following the drastic drop in vehicle sales to China’s financial hub and commercial areas in April. The Shanghai Automobile Sales Trade Association claims that not one new vehicle was sold last month in Shanghai, home to 25 million residents.

($1 = 6.7478 renminbi)