China Extends New Energy Vehicle Purchase Tax Exemption

China will extend its exemption of new energy vehicles from purchase taxes to the end of 2023, according to results of the State Council executive meeting on August 18. This is the third time that China has extended the policy.

In September 2014, the Ministry of Industry and Information Technology and State Taxation Administration jointly issued documents, which was ultimately the beginning of exempting new energy vehicles from purchase taxes.

The policy originally expired at the end of 2017, but was extended to the end of 2020 before it expired again. In March of 2022, China once again extended the policy to the end of 2022.

With the help of the policies, the new energy vehicle market continues to grow. According to the China Association of Automotive Manufacturers (CAAM), the sales volume of new energy vehicles in China was only 75,000 units in 2014 but exceeded 3.5 million units in 2021. In the first seven months of this year, the production and sales volume of new energy vehicles were 3.279 million units and 3.194 million units respectively, up 1.2 times year-on-year.

Cui Dongshu, secretary-general of China Passenger Car Association (CPCA), believes that exempting several hundred yuan of tax every year has little impact on the sales of new energy vehicles, but the introduction of the policy is indeed an encouragement for the development of energy-saving vehicles.

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“The extension of the new energy vehicle purchase tax exemption is in line with expectations,” Cui Dongshu said. “The withdrawal of new energy vehicle purchase subsidies at the end of this year will reduce purchasing willingness, but the exemption of new energy vehicle purchase tax will once again boost part of purchasing power.” Earlier, CPCA predicted that the total sales volume of new energy vehicles is expected to reach 6.5 million units this year, with a year-on-year increase of over 100%.