NEV purchase tax exemptions extended in ministry's continued sustainable drive

China's top industry regulator will further support the development of new energy vehicles with a range of measures, as part of the national effort to achieve a peak in carbon emissions by 2030 and carbon neutrality by 2060.

The measures include formulating a roadmap for the green development of the automobile industry and clarifying supporting policies such as extending purchase tax exemptions for NEVs to the end of 2022, the Ministry of Industry and Information Technology said at an annual meeting last week.

The purchase tax is 10 percent of the selling price of the vehicle.

In addition to the tax exemption, China has been providing subsidies to companies since 2009, with the subsidy amount depending on how good the models perform in terms of mileage on a single charge.

The Chinese government has handed out nearly 150 billion yuan ($23.67 billion) in subsidies for NEVs since 2009. The preferential policy support has attracted both domestic and international NEV makers to ramp up NEV production, establishing a competitive ecosystem in the world's largest auto market.

The government has been slowly trimming its NEV subsidies to allow producers to stand on their own feet. The subsidy will end in 2022.

Carmakers such as Tesla, Xpeng and Chery raised their car prices in China after the subsidies were reduced.

Cui Dongshu, secretary-general of the China Passenger Car Association, said China's NEV market is shifting from being policy-oriented to more market-oriented, but it is a gradual process.

Without the NEV subsidy in 2023, the extension of the purchase tax exemption will play an important role in maintaining the enthusiasm in consumers buying NEVs.

A report from the CPCA showed that reductions in subsidies and rising NEV car prices have only marginally affected the market climate.

Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, said the NEV subsidy is no longer the main factor driving the market trend.

He said what will influence the trend for NEVs depends only on customer demands and whether the carmakers can provide more competitive products.

Last year, China sold 3.52 million NEVs at a growth of 157.5 percent year-on-year, making the country the world's largest NEV market for the seventh consecutive year.

NEVs accounted for 13.4 percent of the market share in China last year, up 8 percentage points compared with 2020.

The CAAM forecasts that this year, NEV sales will reach 5 million units, with a growth rate of 42 percent year-on-year.

The MIIT said it will accelerate the construction of charging infrastructure in old residential areas and on expressways.

China has set up 936,000 charging piles and 14,000 charging stations, up 193 percent and 90 percent respectively year-on-year. And more than 10,000 power battery recycling service outlets have been set up.

The capacity for innovation in the NEV market has significantly improved, especially in in-vehicle lidar and artificial intelligence chips, the MIIT said last week.

The ministry said it will continue to help accelerate innovation and industrialization breakthroughs in key technologies, including power batteries, operating systems and chips, as efforts to further enhance the stability and competitiveness of industrial chain.

The MIIT will also attach importance to battery recycling systems and NEV security regulation to improve the proportion of batteries recycled and their utilization efficiency, and promote the healthy and sustainable development of the industry.