China’s State Council decided to extend the purchase tax exemption for new energy vehicles (NEV) until the end of 2023 to boost the NEV industry, as reported by Reuters on August 19. The extension is expected to result in RMB100bn (USD14.67bn) in tax relief. On August 18, the State Council executive meeting, chaired by Chinese Premier Li Keqiang, also defined measures to provide stimulus to restore the economy hammered by disruptions due to covid-19.
This is the third extension of China’s NEV purchase tax exemption policy. China first implemented the tax exemption scheme in 2014, then extended it in both 2017 and 2020. According to the Ministry of Finance and other authorities in April 2020, the purchase tax exemption for NEVs is set to officially expire by the end of 2022. According to data from the Ministry of Industry and Information Technology, between 2016 and 2022, the Chinese government’s yearly subsidies to the NEV industry increased from RMB860m (USD126m) to RMB10.54bn (USD1.55bn). With government incentives, China’s NEV sales went from just 75,000 units in 2014 to 3.5m units by 2021. China’s NEV industry reached an output volume of 3,279,000 units and sold a total of 3,194,000 units in the first seven months of 2022, representing a 1.2-time increase YoY.