China on Wednesday presented a package of tax incentives totaling 520 billion yuan (66.16 billion euros) over the next four years, the largest package of measures ever given to electric vehicles (EVs) and hybrids, to boost the decline in prices. car sales, which led to a sharp increase. in shares of automobile manufacturers. The package of measures, widely expected after the government promised to support the sector, comes amid concerns about slowing auto sales in China.
Electric and hybrid vehicles will be exempted from the purchase tax of 30,000 yuan per vehicle in 2024 and 2025. This exemption will be halved and capped at 15,000 yuan for purchases made in 2026 and 2027, the Ministry of Finance in a press release. “The extension of the tax exemption for the next four years has exceeded market expectations,” said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA), adding that the costly move suggests little More stimulus measures likely.
More than 25,000 million euros in fiscal measures since 2014
China has subsidized electric vehicle purchases for more than a decade, but the program ended last year. The new measures extend the existing tax exemption, which is set to expire at the end of 2023. The package of tax measures targeting electric vehicles, first introduced in 2014 and extended three times to 2022, exceeded 200 billion yuan last year, said the deputy finance minister. Xu Hongcai said at a press conference. Xu Hongcai said that this year’s exemption amount will exceed 115 billion yuan, indicating that the 520 billion yuan of new measures will be the highest ever.
Tax incentives put green vehicles at the forefront of a broad campaign to boost Chinese growth. In recent years, the government has strongly promoted green vehicles through incentives that have supported the development of local players such as Li Auto, NIO and BYD. BYD, backed by Berkshire Hathaway, Warren Buffett’s investment firm, now sells more cars than Volkswagen in China.
A 30% increase in sales next year
Analysts said limiting the tax break would help boost sales of cheaper models produced by Chinese companies, rather than sales of high-end vehicles from overseas automakers. NEV sales suffered earlier this year after the government ended the purchase subsidy program, but rebounded after automakers, including Tesla, cut prices to defend market share.
“This will promote the growth of electric vehicles in China,” said Susan Zou, vice president of research firm Rystad Energy, who predicts EV sales will rise 30% in 2024, up from an estimated 15% this year.
Electric vehicle sales rose 10.5% in May from a month earlier, according to CPCA data, and rose 60.9% year-on-year as health restrictions weighed on auto production and sales. Many local governments have also announced new stimulus measures, expanding on the various incentives put in place this year to support sales.
Source: BFM TV
