Electric and plug-in-hybrid cars will be exempted from a 10% sales tax in 2024 and 2025 to boost sales.
The Chinese government has moved to further bolster sales of electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs) with the announcement of a ¥520 billion (AUD$107.3 billion) tax-relief package.
To be spread across four years, the new measures are aimed at encouraging new vehicle buyers in China to choose EVs and PHEVs over conventional internal combustion engine (ICE) models and used vehicles by offering an exception on purchase tax, which currently stands at 10%.
Under the new measures in China, buyers of so-called new energy vehicles (NEVs), which include EVs and PHEVs, will be entirely exempted from purchase tax in 2024 and 2025, amounting to saving of up to a limited ¥30,000 (AUD$6194) per vehicle.
Starting in 2026 and extending through 2027, the tax exemption will be reduced by 50%.
Details of the tax-relief package were included in a statement issued by the Chinese Ministry of Finance.
A previous tax-relief package for NEVs was meant to run throughout 2020 only. However, it was extended until the end of 2022 as part of the Chinese government’s Covid stimulus package.
Since 1 January 2023, the Chinese government has no longer provided tax relief to buyers of NEVs. This has forced car makers to cut prices to remain competitive at the expense of profitability.
Weakening new-car sales in the world’s largest automotive market over recent months has raised concerns over Chinese’s continued economic growth.
Stimulatory financial measures were expected following an early pledge by the Chinese government to support the country’s domestic automotive industry