China's Ministry of Finance announced on 28 June that buyers of
new energy vehicles (NEVs) will continue to enjoy the new vehicle
purchase tax break until the end of 2020.
Significance: The extended tax break on NEVs is
part of China's incentive package to increase their appeal to
consumers. Electric vehicles (EVs) and plug-in hybrids have been
exempt from the 10% purchase tax since 2014. For 2019 and 2020, it
will still play a positive role in encouraging consumers to opt for
a NEV. The preferential tax policy, along with government-backed
subsidies, effectively drives down the purchase price. Such
policies will eventually be scrapped by policy makers in order to
reduce manufacturers' reliance on financial support.
