Last year China tripled its plug-in electrified vehicle (PEV) sales surpassing U.S. sales for the first time while it was at it, but some of those numbers were allegedly padded.

According to a report by the Economic Observer – noting discrepancies between reported sales and vehicle registrations – tens of thousands of “new energy vehicles” (NEVs) “disappeared” as soon as they were newly minted in Chinese production plants.

Of course these “ghost” cars did not really do a “vanishing act,” says Shanghai Daily, but allegations are they were fraudulently reported as incentive-eligible cars and what did in fact disappear was government money to their “unscrupulous” manufacturers.

“Instead of supporting a critical emerging industry, it became a temptation for scoundrels,” said Shanghai Daily assessing a system in which Chinese central planners have sought to jump start technological development to meet at-times dire air quality concerns.

SEE ALSO: Why Europe Has Passed the US As Number One In Plug-in Electrified Vehicles

In response, last week a joint investigation was opened into the matter by China’s Ministry of Finance, the Ministry of Science and Technology, the Ministry of Industry and Information Technology, and the National Development and Reform Commission.

Hefty subsidies offered by the central government meanwhile for private purchases of NEVs are already on the decline, but it is being alleged that anyone who still wants to game the system may still be incentivized to try.

Local subsidies also sweeten the pot, and last year in total China’s entire NEV industry was spurred along by an estimated $4.56 billion (30 billion yuan) in local and central government incentives.

China’s current five-year plan already calls for subsidies in 2017 and 2018 to be reduced by 20 percent from 2016 levels, and another 20-percent cut follows in 2019 and 2020.

“China’s new energy industry is not a late starter, but is still lack of breakthroughs in high-end products and core technologies,” said Minister of Finance Lou Jiwei to the China Electric Vehicle 100 forum, the most senior-level annual meeting of market players, academics and government officials. “A big reason is that carmakers rely too heavily on subsidies and fail to keep up their own spirits of perseverance and innovation.”

“High subsidies are the primary reason for low-quality, low-efficiency new energy car development,” said Yang Yusheng, a member of the Chinese Academy of Engineering.

As China revisits policies to close loopholes, reports have said it may take lessons from California.

According to Xin Guobing, vice minister of the Ministry of Industry and Information Technology, after 2020 incentives for green car production will likely replace direct subsidies with an emissions credit trading system.

The decision to trim subsidies is part of a corrective action to make the industry more market driven with an eye toward an economically sustainable industry for the environmentally sustainable vehicles.

China is otherwise keeping its eye on an ambitious goal of 5 million new energy cars on the roads by 2020. To do this, the government needs a fund of about 390 billion yuan set aside, according to Yang Yusheng.

Shanghai Daily

Hat tip to Mario R. Duran.