China extends tax breaks to support sales of low-emission vehicles

China will extend tax breaks on purchases of electric vehicles, plug-in hybrids and hydrogen-powered vehicles through 2027. The cost of the measures is estimated at around USD 72 billion.Reuters reported.

Support for electric mobility

Chinese officials announced on Wednesday, June 21, that tax breaks for new low-emission vehicles would be extended. Newly sold vehicles have been exempt from the 10% tax since 2014, and the relief was recently extended by one year, through the end of 2023. The tax breaks will now run through 2027.

The maximum support will be around USD 4,170 in 2024–2025, and half that amount through the end of 2027. China is responding to slowing growth in new car sales, which could slow further without the support.

“The four-year extension exceeded market expectations,”said a representative of the country’s automotive association in response to the announcement.

As Bloomberg reports, sales of electric vehicles and plug-in hybrids rose 41% from January to May this year. However, compared with the same period last year, when sales increased by 120%, growth has slowed. Strong market support has helped automakers such as BYD and NIO grow.

The rise of Chinese electric vehicles

BYD, the company mentioned first, is gaining an increasing share of the Chinese market at the expense of traditional automakers such as VW, Ford and Toyota. In April this year, Bloomberg reported that BYD had ousted VW as China’s best-selling carmaker after more than 15 years.

In the coming years, the expected expansion of Chinese electric vehicles into Europe will be a major test for local carmakers. The VW Group’s strategic plan, which also includes Škoda Auto, can be viewed here. The strategic plan was released on the same day as the announcement that China would extend its tax breaks.