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 30,000 yuan ($4,175) per passenger vehicle, according to a statement issued on Wednesday by the Ministry of Finance, the State Taxation Administration and the Ministry of Industry and Information Technology.
The tax on NEVs purchased in 2026 and 2027 will be halved, and each passenger vehicle bought will receive up to 15,000 yuan 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 520 billion yuan of tax exemptions and reductions, said Xu Hongcai, vice-minister of finance, at a news conference in Beijing on Wednesday.
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, said that extending the policy of NEV purchase tax exemption is expected to waive 200 billion yuan 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 percent of total vehicle sales in the country, while estimating that the NEV market will gain growth momentum next year.
"The competition in the plug-in hybrid EV segment will also become more intense in 2024," Cui added.