China is planning to extend the purchase tax exemptions for new energy vehicles (NEVs), which was supposed to expire at the end of 2023, with an aim to shore up the sluggish electric vehicle (EV) market, as reported by Bloomberg on June 2. The State Council, chaired by Premier Li Qiang, held an executive meeting where it was decided that the reductions and exemptions on NEV purchase taxes will be “prolonged and fine-tuned.” The proposed policies include an extension of the purchase tax break for EVs and plug-in hybrids with a price tag below RMB300,000 (USD42,400). The meeting also emphasized the need to build high-quality charging facilities to stabilize market expectations and stimulate consumption.

This would be the fourth extension of China’s NEV purchase tax exemption policy. The tax exemption was initially introduced in 2014 and has since been extended in 2017, 2020, and 2022. By promoting NEV sales, China aims to drive the transformation and upgrading of the automotive industry and work towards its goal of achieving carbon neutral by 2060. In the first four months of 2023, new car deliveries in China declined by 1.4% year-on-year, while the shipment of EVs and plug-in hybrids experienced a slower growth rate of 36%, in contrast to the remarkable 128% growth seen during the same period in 2022. The slowdown in consumption can be attributed to both the stagnant economy and the phasing out of government subsidies for NEV buyers. China had set the expiration date for NEV subsidies at the end of 2022, prompting consumers to take advantage of the limited-time discounts.

Sources:

https://www.bloomberg.com/news/articles/2023-06-02/china-mulls-extending-tax-exemption-for-cheaper-electric-cars

https://www.chinadaily.com.cn/a/202306/02/WS647a077aa3107584c3ac3a56.html

https://www.scmp.com/business/china-business/article/3193859/electric-cars-beijing-extends-exemption-5-cent-purchase-tax