China Extends Tax Exemption On EVs

China announced on Wednesday the renewal of a tax exemption on the purchase of new energy vehicles (NEVs), a new pillar of the economy whose lacklustre recovery has market observers pushing for greater stimulus.

NEVs purchased between January 1, 2024 and December 31, 2025 will be exempt from purchase tax of up to 30,000 yuan (US$4,168) per vehicle, according to a statement issued by the Ministry of Finance ahead of a broader policy announcement boosting NEV growth.

The tax on NEVs acquired between 2026 and 2027 would be cut in half, with the decrease not surpassing 15,000 yuan per car, according to the ministry.

The current policy exempts NEVs from purchasing taxes until the end of the year, which includes all-battery electric vehicles (EVs), plug-in petrol-electric hybrids, and hydrogen fuel-cell vehicles.

The tax reductions will total 520 billion yuan in 2024-2027, according to Vice Minister of Finance Xu Hongcai during a news briefing.

The declaration comes after a Cabinet meeting on June 2, during which officials stated that they will extend and optimise the tax exemption and investigate policies to support NEV development.

The incentives put NEVs, a staple of big-ticket purchasing, at the forefront of a broad-based campaign to revive growth in the world's second-largest economy, which has slowed following a strong start to the year.

In recent years, the government has strongly promoted NEVs to reduce air pollution through subsidies that have aided the emergence of domestic players such as BYD, Li Auto, and Nio.