BEIJING China's Ministry of Finance said on Thursday that five domestic automakers had cheated its programme to subsidise electric and plug-in hybrid vehicles and received roughly 1 billion yuan (112.33 million pounds) in illegal subsidies.
The companies alleged to have benefited primarily make buses and include a subsidiary of Chery Holding, owner of the seventh most popular Chinese passenger car brand.
The ministry said it would revoke the production licence of Suzhou Gemsea Coach Manufacturing, while the other four firms would be fined the equivalent of 50 percent of the wrongly received subsidies, while efforts would also be made to recover any awards which had been obtained illegally.
The Chinese government has used subsidies and hard targets to promote electric and plug-in hybrid vehicles, spurring sales to more than quadruple last year, in an effort to combat heavy pollution in much of the country.
The subsidy cheating investigation is another blow to China achieving its full year sales target of 700,000 new energy vehicles (NEVs), Chinese shorthand for electric and plug-in hybrid cars, Yale Zhang, managing director of consultancy Automotive Foresight, said.
Only 215,000 such cars were sold in the first seven months of the year, according to China's automakers association.
The ministry said Suzhou Gemsea had fabricated virtually its entire new energy vehicle manufacturing and sales operations, including forging sales and manufacturing certificates and licenses for the vehicles.
"Individual companies seeking profit, violated relevant laws to cheat and fraudulently obtain financial subsidies, seriously disrupting the market order, violating the legitimate interests of firms that honour the law in researching, developing and manufacturing new energy vehicles," it said in a statement.
Suzhou Gemsea could not immediately be reached for comment.
Chery Wanda Guizhou Bus, King Long United Auto Industry, Shenzhen Wuzhoulong Motors, and Henan Shaolin Bus claimed subsidies for vehicles they had not finished building, the ministry said.
Shaolin Bus declined to comment, while the other companies could not immediately be reached for comment.
The finance ministry laid out penalties for other potential violations to subsidy policies but did give names of other companies alleged to have wrongfully obtained subsidies. The ministry inspected 90 companies in total.
China spent $4.5 billion last year in subsidies for such vehicles, although it is set to gradually phase out the payments by 2021.
(Additional reporting by Beijing newsroom; Editing by Muralikumar Anantharaman and Alexander Smith)