Heavyweight! The exemption of purchase tax for new energy vehicles extended until the end of 2023

On August 19, the State Council's executive meeting decided to extend the policy of exempting the purchase tax for new energy vehicles to promote bulk consumption until the end of next year. Exemptions from vehicle and vessel taxes, consumption taxes, road rights, license plates, and other support will continue. A coordination mechanism for the development of the new energy vehicle industry will be established, using market-oriented methods to encourage the survival of the fittest among whole vehicle enterprises and promote the development of supporting industries. The construction of charging piles will be vigorously promoted with policy-based and developmental financial tools providing support.

The meeting also emphasized encouraging local governments to provide moderate subsidies for green smart home appliances. Actively develop digital consumption, thoroughly implement supportive policies for struggling industries such as catering and retail, fully extend the additional deduction of value-added tax in the service industry, ensure that all eligible entities can enjoy it, help market players overcome difficulties, and support consumption.

Analysts pointed out that the extension of the new energy vehicle purchase tax policy will further boost the production, sales, and market penetration rate of new energy vehicles. The demand for charging and battery swapping stations will also increase significantly, leading to a new wave of infrastructure development.

Since May 2022, the government has introduced several policies beneficial to the automotive industry. On May 31, the State Council proposed a phased reduction of RMB 60 billion in purchase taxes for some passenger cars. On July 7, 17 departments jointly issued 12 measures to promote automobile consumption.

In August, the State Council executive meeting planned further measures to expand demand, promoting effective investment and increasing consumption. The meeting clearly stated the continuation of the exemption of purchase tax for new energy vehicles.

As the main driver of China's auto market, domestic production and sales of new energy vehicles maintained rapid growth in July, completing 617,000 units in production and 593,000 units in sales, both growing 1.2 times year-on-year, with a market share of 24.5%.

From January to July 2022, domestic production and sales of new energy vehicles reached 3.279 million units and 3.194 million units respectively, both increasing 1.2 times year-on-year, with a market share of 22.1%. Among them, fuel cell vehicles achieved production and sales of 2,094 units and 1,633 units, growing 2.1 times and 1.3 times respectively year-on-year.

As early as September 1, 2014, the Ministry of Industry and Information Technology (MIIT) and the State Administration of Taxation released the 'List of New Energy Vehicle Models Exempted from Purchase Tax (First Batch)'. Consumers purchasing models listed in the directory are exempt from paying purchase tax. According to data from the China Passenger Car Association (CPCA), new energy vehicle sales were 20,400 units in the first half of 2014, while in the second half this figure increased to 54,200 units, demonstrating the significant role of policy in driving end-user markets.

In 2017, relevant departments issued the 'Announcement on Continuing the Preferential Policies for Vehicle Purchase Tax', extending this policy until the end of 2020. In March 2020, the policy of exempting purchase tax for new energy vehicles was extended again until the end of 2022.

Commentators believe that with the recent reiteration by the State Council executive meeting to extend the policy of exempting purchase tax for new energy vehicles, consumers will continue to benefit when buying such vehicles.

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