China extends tax break for New Energy Vehicles to 2027

News Analysis

23

Jun

2023

China extends tax break for New Energy Vehicles to 2027

The China State Council Information Office announced an extended RMB520Bn (US$72Bn) package to support sales of electric vehicles in the period to 2027 

An extended package of tax breaks on new EVs and other electrified vehicle sales was announced by the China State Council Information Office on 21st June. The package sees purchase tax exemptions for new energy vehicle (NEVs) sales in 2024 and 2025, roughly equal to 10% of vehicle cost, with exemptions being capped at RMB15,000 (US$2,085) per vehicle in 2026 and 2027. The extension to the package was strongly alluded to in a meeting of the Chinese cabinet earlier in June, which stated action to support the development of the NEV market would be implemented. 

As the largest national market for electric vehicles globally, developments in the Chinese industry have global consequences for the transition to electric vehicles globally. The additional support that these tax breaks provide to NEV sales in China is also likely to better support Chinese brands looking to increase market share in the rest of the world. Strong Chinese domestic sales for manufacturers such as BYD and NIO could see more competitive pricing being achieved in the European or North American markets, which have long been a target for major Chinese brands.

The extension of tax breaks on NEV sales is expected to accelerate growth in sales of vehicles in China, placing further strain on raw materials and upstream supply chains for materials such as lithium, cobalt and rare earths elements in the short to medium term.        


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