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China unveiled a 520 billion yuan ($72.3 billion) package of tax breaks for purchases of new energy vehicles over the next four years as it seeks to boost slower auto sales growth.
New energy passenger vehicles purchased during the period of January 1, 2024 – December 31, 2025 will be exempt from vehicle purchase tax, with the tax exemption amount for each car capped at 30,000 yuan, according to a statement jointly released by the Ministry of Finance, the General Administration of Taxation and the Ministry of Industry and Information Technology on Wednesday.
New energy passenger vehicles purchased between January 1, 2026 and December 31, 2027 will see vehicle purchase tax cut by half, with tax reduction amount for each car capped 15,000 yuan, it said.
Cumulative NEV tax breaks, which were first introduced in 2014 and extended three times as recently as in 2022, exceeded 200 billion yuan as of last year, Vice Minister of Finance Xu Hongcai said at a press conference.
Xu said this year’s exemption would top 115 billion yuan, indicating the new package of 520 billion yuan would be the biggest ever amount of tax breaks for the industry.
Weakening sales growth in the world’s biggest auto market has raised concern over China’s economic growth and while financial support was widely expected after an earlier government pledge to promote the industry, shares in major automakers jumped after the details were released.
“The extension by another four years beat market expectations,” said Cui Dongshu, secretary general of the China Passenger Car Association.
NEV sales suffered a hit earlier this year after the government ended the EV purchase subsidy programme, but bounced back after automakers including Tesla cut prices to defend market share and after the previous extension of the purchase tax exemption.