China’s latest policy measures to extend purchase tax breaks on new energy vehicles until the end of 2027 are expected to further stimulate consumer buying sentiment for NEVs and inject strong impetus into the world’s biggest auto market, industry experts said. The NEVs bought in 2024 and 2025 will be exempted from purchase tax amounting to as much as CNY30,000 per passenger vehicle, according to a statement by the Ministry of Finance, the State Taxation Administration and the Ministry of Industry and Information Technology. Tax for the years 2026 and 2027 will be halved, and each passenger vehicle bought will receive up to CNY15,000 of tax exemption, the statement said. The tax incentive covers pure electric vehicles, plug-in hybrid electric vehicles and fuel-cell vehicles. Preliminary estimates indicate that the last extension will result in a total of CNY520 billion of tax exemptions and reductions, said Xu Hongcai, Vice Minister of Finance.
Before the policy extension, the current exemption of purchase taxes on NEVs was scheduled to expire by the end of this year. The country first began exempting NEVs from purchase taxes in 2014, and this is the fourth time that the tax-exemption policy has been extended. Cui Dongshu, Secretary General of the China Passenger Car Association (CPCA), said that extending NEV purchase tax exemption is expected to waive CNY200 billion in taxes by 2025, and such a stimulus policy will play a crucial role in bolstering the development of the NEV industry in the long run. Cui said the sales of NEVs are expected to reach 8.5 million units this year, accounting for 36% of total vehicle sales in the country. “The competition in the plug-in hybrid EV segment will also become more intense in 2024,” Cui added.
Zhang Xiang, Researcher at the Jiangxi New Energy Technology Institute, said that Chinese NEV manufacturers should invest more in the research and development (R&D) of NEVs, accelerate technological innovation and roll out new models. “Sales of NEVs are mainly focused on the first- and second-tier cities, but there is immense growth potential in lower-tier cities, townships and rural areas for NEVs,” he added. More efforts are needed to speed up the layout and construction of public charging infrastructure, especially in rural areas, and the recycling of power batteries, in order to support the development of NEVs and satisfy people’s charging demands, Zhang added.
China’s NEV segment has witnessed rapid growth this year. Sales of NEVs in the country expanded 60.2% year-on-year to 717,000 units in May. In the first five months of the year, NEV sales increased 46.8% from a year ago to 2.94 million units, and NEV output totaled over 3 million units, increasing 45.1% year-on-year, the China Daily reports.
China's No 1 EV maker BYD delivered 547,917 passenger EVs, including hybrids, in the first quarter of 2023, more than Tesla's 422,000. Former Tesla Director Steve Westly said, “by any standard, BYD has come from nowhere to be one of the major car companies in the world. Some would say they’ve out-Tesla’d Tesla”. This year, BYD hopes to sell as many as 3.7 million fully electric and plug-in hybrid cars, while Tesla has said it may produce as many as 2 million EVs.
