Guangzhou (JLC), June 7, 2023 – China is set to extend and optimize the exemption from purchase tax for new energy vehicles (NEVs), the State Council said at a meeting on June 2, according to National Energy Administration (NEA).
China has been implementing the purchase tax exemption policy since 2014 to stimulate the development of the NEV sector. In September 2022, it extended the policy to the end of 2023, according to a notice published by the authorities.
NEVs represent the mainstream direction for the transformation and upgrading of the automotive industry, with great potential to grow, the NEA noted.
In general terms, NEVs include pure electric vehicles (EVs), plug-in hybrid electric vehicles (PHEVs) and fuel-cell electric vehicles (FCEVs).
The industry has been experiencing tremendous growth in recent years. In Jan-Apr, China’s production and sales of NEVs reached 2.29 million and 2.22 million respectively, a year-on-year growth of 42.8% for both. NEVs’ market share accounted for 27% of total passenger cars in China, according to data from China Association of Automobile Manufacturers (CAAM).
Export also saw an explosive growth in Jan-Apr, with a total of 348,000 NEVs exported, a surge of 170% year on year, the CAAM data shows.
China's latest efforts to extend the tax exemption policy are expected to further spur consumer buying and inject vitality into the automobile market.
China implemented a 5%-10% purchase tax on fuel-powered passenger vehicles. If consumers choose to buy a NEV worth CNY300,000 (before tax) instead of a traditional fuel car of the same value, it would save them about CNY26,500, based on a purchase tax of 10% and a VAT of 13%.
A total of CNY87.9 billion (about USD13.06 billion) of the tax was waived last year, according Xinhua, citing data from the State Taxation Administration.
