China will extend the exemption of a purchase tax on new-energy vehicles until the end of 2020, a boost for makers of hybrid and electric cars.
The extension signals the strong determination of the government to encourage sales and use of green cars to help reduce dependence on fossil fuels and clean up the skies in major cities.
Buyers of qualified electric vehicles, plug-in hybrid vehicles and fuel-cell vehicles will not have to pay the 10 percent vehicle purchase tax — which was set to expire at the end of this year — from January 1, 2018, through December 31, 2020, according to a statement issued yesterday by the Ministry of Finance, the Ministry of Industry and Information Technology, the State Administration of Taxation and the Ministry of Science and Technology.
The extension comes as automakers in China brace to meet strict green-car quotas starting in 2019 that are sparking a flurry of electric car deals and new launches of electric and hybrid models.
Amid the shift, some global automakers have called on China to maintain financial support for the market, citing concerns consumer demand alone will not be sufficient to drive sales without state-backed incentive schemes to lure buyers.
“The policy will further support the innovative development of the new-energy vehicle industry,” the statement said.
China introduced the tax exemption three years ago. New-energy vehicles already qualified for the rebate will continue to be exempted from the tax.
Cui Dongshu, secretary-general of the China Passenger Car Association, said the policy is a positive signal to both industry and consumers.
“The policy will effectively promote consumers to choose new-energy vehicles and result in a steady and rapid growth of the new-energy vehicle market,” Cui said.
China’s auto market, the world’s largest, has slowed sharply this year, but new-energy vehicles has been a bright spot.
In the first 11 months, 609,000 new-energy vehicles were sold in China, up 51.4 percent year on year, according to data from the China Association of Automobile Manufacturers.
“Sales of new-energy vehicles in China are expected to exceed 700,000 units this year,” Cui added.
The extension of the exemption lifted shares of new-energy vehicle makers. Shenyang Jinbei Automotive Co surged by the daily 10 percent cap to 5.71 yuan (87 US cents), and Xiamen King Long Motor Group Co rose 3.33 percent to 13.03 yuan.