China is to launch a pilot programme in five cities to provide subsidies to buyers of electric and hybrid cars.

Residents of Shanghai and Shenzhen, as well as Hangzhou and Hefei in the east of the country and Changchun in the northeast, would receive up to CNY50,000 (US$7,320) in subsidies if they buy plug-in hybrid cars, the Ministry of Finance said on its website.

The maximum subsidy for those who bought fully electric cars was CNY60,000, the ministry said.

“The handouts could get people interested in green car models now that the government has come up with a concrete plan and real money to back it up,” Harry Zhao, an analyst with industry consultancy CSM Worldwide, told Reuters. “But it’s unrealistic to expect it to work like magic; like tax incentives did last year.”

The impact of the new subsidies on green car sales was unlikely to be very large in the short term because of high battery costs and an inadequate charging network, but would make it easier for those interested in cars fuelled by alternative energy to decide to buy such vehicles, analysts said.

The government would also allocate unspecified funding to bankroll the construction of charging stations and battery recovery networks in the pilot cities, the finance ministry added.

Instead of handing out subsidies to consumers directly, the government would allocate the money to carmakers, who would then lower the prices of relevant models accordingly, it said, without indicating when the programme would begin.

The level of handouts would be reduced after carmakers sold a total of 50,000 green cars, it said, without elaborating.

Beijing would also offer nationwide subsidies of CNY3,000 on purchases of cars with 1.6-litre engines or smaller and that consume 20% less fuel than current standards, it added.