The country wants to boost its new energy vehicle sector and sales.
The Chinese government has unveiled a $72 billion tax break package for the sales of new energy vehicles (NEVs) from 2024 through 2027. The country aims to boost its NEV sector and stimulate car sales, according to the People’s Republic’s State Council Information Office. NEVs include battery electric vehicles but also plug-in electric-petrol hybrid vehicles and fuel-cell electric vehicles. Electric-petrol hybrid vehicles without plug-in applications are not covered by the terminology.
NEVs purchased from 2024 through 2025 will not be subject to the purchase tax and receive a tax exemption of up to 30,000 yuan (roughly $4,200). NEVs bought from 2026 through 2027 will be exempt from half the purchase tax.
Sales of new energy vehicles (NEVs) in China saw a five-fold increase from 1.37 million units in 2020 to 6.89 million units in 2022, accounting for over one-fourth of China’s overall vehicle sales in 2022, according to the Chinese State Council Information Office. The tax break could push this number further. Rising sales of EVs and NEVs could also boost the global demand for critical minerals like lithium and rare earths higher because these raw materials are central components of these automobiles.
China is currently the largest market for EVs, accounting for nearly 59 percent of the global sales volume, according to the technology market research firm Counterpoint. Additionally, the People’s Republic is also the biggest producer of EVs, accounting for more than half of the global market share in 2021, according to Daxue Consulting. Rising exports of Chinese-made NEVs threaten the market position of established manufacturers. German insurance company Allianz sees this as a major challenge for the European automotive industry and urges policymakers to respond accordingly.