Smart and Sustainable Electric Mobility
In the first half of the year, NEVs, including BEVs and PHEVs, saw 152,033 license plate registrations in Shanghai, contributing to 51.24 percent of all vehicles.
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The document lists 10 measures, three of which are directly related to support for the NEV sector, and specifically mentions support for the battery swap model.
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China has revised its dual-credit policy, one of the key drivers of the rapid growth of the NEV industry, and the changes will take effect on August 1.
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China's so-called dual-credit policy, implemented over the past several years, has been a key driver of the rapid growth of the new energy vehicle (NEV) industry. Now the policy is seeing the latest revisions, with car companies earning fewer credits for producing NEVs.
China's Ministry of Industry and Information Technology (MIIT) today released the latest update to the policy, which will go into effect on August 1.
One of the most significant changes is the average reduction of about 40 percent in credits for standard models of new energy passenger vehicles, according to the MIIT.
After the adjustment, car companies will receive credits for each NEV produced calculated as follows:
For pure electric passenger cars, the credit calculation formula for standard models is 0.0034 x R + 0.2, where R is the range in km.
For plug-in hybrid passenger cars, a standard model's credit is 1.
For fuel cell vehicles, the credit formula for a standard model is 0.05×P, where P is the rated power of the fuel cell system in kW.
The upper limit of the standard model credit for pure electric passenger vehicles is 2.3, and the upper limit of the standard model credit for fuel cell passenger vehicles is 4.
Prior to this adjustment, NEV credits were calculated as follows:
For pure electric passenger vehicles, the standard model credit calculation formula was 0.0056 x R + 0.4.
For plug-in hybrid passenger vehicles, the standard model credit was 1.6.
For fuel cell vehicles, the standard model credit calculation formula is 0.08×P.
The upper limit of standard model credit for pure electric passenger cars is 3.4, and the upper limit of standard model credit for fuel cell passenger cars is 6.
Take a model with a CLTC range of 500 km as an example, before the latest adjustment, a car company could earn 3.2 credits. After August 1, the credit will be 1.9, a reduction of 40.63 percent.
China released the dual-credit policy in 2017, which is known as the " Parallel Management Measures for Average Fuel Consumption of Passenger Vehicle Enterprises and New Energy Vehicle Credits". The policy has been in effect since April 1, 2018.
Automakers that fail to meet the fuel consumption control requirements can offset the negative credits from excessive fuel consumption by generating their own NEV credits, or by purchasing credits from other companies.
If a car company is unable to get its negative credits to zero, then they need to submit a product adjustment plan to the MIIT and set a deadline for compliance.
Until their negative credits are zeroed out, the substandard products cannot be sold to the public.
In essence, this amounts to penalizing car companies that continue to produce vehicles powered entirely by internal combustion engines and using these fines to subsidize the production of NEVs.
In addition to reducing the number of credits generated per NEV produced, the latest adjustments include the establishment of a credit pool management system.
Under this system, when there are too many credits, automakers can voluntarily store positive credits in the pool, which is valid for five years. When the number of credits is too low, they can withdraw their stored positive credits.
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PHEVs get the same tax exemption as BEVs, and the extension of the tax break will attract more automakers to the market, Fitch said.
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China last week extended tax incentives for new energy vehicles (NEVs) for four years, a move that in the view of international credit rating agency Fitch Ratings could help renew electrification momentum.
China's extension of tax breaks for electric vehicle (EV) purchases should facilitate steady growth in the sector, while the continued coverage of subsidies for plug-in hybrid electric vehicles (PHEVs) reinforces Fitch's view that such vehicles will be a key catalyst for China's transition to EVs, analyst Jing Yang's team said in a June 28 research note.
On June 21, China's Ministry of Finance announced that NEVs with a purchase date between January 1, 2024, and December 31, 2025, will continue to be exempt from vehicle purchase tax, but the exemption will not exceed RMB 30,000 yuan ($4,340) per vehicle.
For NEVs with a purchase date between January 1, 2026 and December 31, 2027, the vehicle purchase tax will be levied at half the normal rate, with a tax reduction of no more than RMB 15,000 per vehicle.
"We believe the renewal of tax waivers for consumers purchasing EVs until end-2025 aligns with market expectations. Purchase taxes will be halved in 2026-2027 and then return to normal levels," Fitch said.
Sales of PHEVs, including extended-range electric vehicles (EREVs), will continue to grow rapidly under the updated policy, with these vehicles receiving the same tax exemption as battery electric vehicles (BEVs), the note said.
PHEVs are a close substitutes to traditional internal combustion engine vehicles because drivers do not suffer from mileage anxiety or charging inconvenience, and are therefore widely seen as a transitional product before the market shifts completely to BEVs, Fitch said.
PHEVs' share of China's EV market soars from 17 percent in 2021 to 28 percent in January-May 2023, Fitch said.
Competition in the PHEVs segment has intensified, and the extension of tax breaks will attract more automakers to the market, according to the note.
Plug-in hybrids are an easier sub-segment for traditional automakers to compete in than BEVs, with Great Wall Motor, Geely and Changan Automobile all launching competitively priced plug-in hybrids this year, Fitch said.
Joint venture brands, despite having a firmer foothold in the market, have been slowed due to their global parent companies' focus on BEVs and less attractive pricing, the note said.
Tax breaks for high-end EVs will remain in place, which could ease local automakers' concerns about upgrading to premium EV brands, did not expect the waivers to be renewed, and should incentivize traditional luxury carmakers to transition faster toward EVs, Fitch said.
The latest program exempts consumers who buy battery swap-enabled EVs from the battery tax for the first time, Fitch noted, saying it expects this to benefit EV brands selling high-end BEVs with battery swap capability and to encourage automakers to adopt the model.
Overall, Fitch believes the subsidy extension will have little impact on EV sales in China in 2023 and continues to forecast EV deliveries to grow by more than 30 percent during the year and EV market penetration to reach 35 percent.
However, the extension could reduce front-loaded purchases in the fourth quarter of 2023, as consumers will no longer be eager to take advantage of expiring tax breaks, Fitch said.
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China's Ministry of Finance explains in detail how consumers will enjoy NEV tax breaks in 2024-2027
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For a NEV with a pre-tax price of RMB 300,000, consumers will continue to be exempt from purchase tax from 2024-2025, while they will be subject to RMB 15,000 in purchase tax from 2026-2027.
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China's Ministry of Finance (MOF) has provided a more detailed explanation of its future purchase tax policy for NEVs (NEVs), after announcing the policy for the next four years last week.
In a Q&A posted on its website today, the MOF provided details on how the NEV purchase tax will be levied over the next four years.
In short, for a NEV with a pre-tax price of RMB 300,000 ($41,600), there will continue to be no purchase tax in 2024-2025, while in 2026-2027 there will be a purchase tax of RMB 15,000.
On June 21, the MOF announced that NEVs with a purchase date between January 1, 2024, and December 31, 2025, will continue to be exempt from vehicle purchase tax. Still, the exemption amount will not exceed RMB 30,000 per vehicle.
For NEVs with a purchase date between January 1, 2026, and December 31, 2027, the vehicle purchase tax will be levied at half the normal rate, with the tax reduction not exceeding RMB 15,000 per vehicle.
When consumers purchase a NEV, if the invoice for the car and the battery are separate, the taxable price is the price of the body before tax.
In today's Q&A, the MOF provided examples of how the NEV purchase tax will be calculated over the next four years:
For the years 2024-2025, NEV purchase tax continues to be exempted, but the tax exemption amount for each vehicle will not exceed RMB 30,000.
For example, Mr. Li purchases a new energy passenger vehicle that meets the tax exemption criteria on February 5, 2024.
If the sales price of the vehicle is RMB 300,000 (excluding VAT, same below), then the normal vehicle purchase tax rate is 10 percent and his tax amount is RMB 30,000 (30 x 10 percent).
According to the tax exemption policy at this time, the amount of tax exemption he can enjoy is RMB 30,000. Since the vehicle does not exceed the RMB 30,000 tax exemption limit, Mr. Li is not required to pay vehicle purchase tax.
For a new energy passenger car with a sales price of RMB 500,000, the normal tax amount is RMB 50,000 (50×10 percent). According to the tax exemption policy, Mr. Li is entitled to a tax exemption of RMB 30,000 and needs to pay vehicle purchase tax of RMB 20,000.
In 2026-2027, the vehicle purchase tax will be reduced by half, while the tax reduction will not exceed RMB 15,000 per vehicle.
For example, on March 1, 2026, Mr. Zhang purchases a new energy passenger car that meets the tax reduction criteria.
If the sales price of the vehicle is RMB 300,000 and the vehicle purchase tax rate is 10 percent, then the normal tax amount is RMB 30,000 (30 x 10 percent).
According to the policy of 50 percent reduction in purchase tax, the tax reduction is RMB 15,000 (3×50 percent). As the vehicle does not exceed the RMB 15,000 tax reduction limit, Mr. Zhang is entitled to a RMB 15,000 tax reduction and is required to pay RMB 15,000 vehicle purchase tax.
If the sales price of the vehicle is RMB 500,000, then the tax payable is RMB 50,000 (50 x 10 percent). Under the 50 percent reduction policy, the tax reduction is RMB 25,000 (5 x 50 percent), which exceeds the RMB 15,000 tax reduction limit.
According to the policy at that time, Mr. Zhang is entitled to RMB 15,000 tax reduction and needs to pay RMB 35,000 vehicle purchase tax.
CnEVPost would like to remind that the prices of the vehicles in the above examples are all prices excluding VAT.
In China, the basic VAT rate is 13 percent. The prices that car companies are showing to consumers are the prices including VAT.
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From now until 2027, pure electric vehicles will continue to enjoy purchase tax incentives, which will give NIO vehicles a significant advantage over fuel-powered luxury vehicles in terms of purchase costs, NIO said.
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China today announced details of an extension of tax incentives for new energy vehicle (NEV) purchases, and NIO (NYSE: NIO) welcomed the move.
From now until 2027, pure electric vehicles (EVs) will still enjoy purchase tax incentives, which will give NIO vehicles a huge advantage over fuel-powered luxury vehicles in terms of purchase costs, the electric vehicle (EV) maker said in a comment shared with CnEVPost.
With the new EV purchase tax policy in place, NIO's body-battery separation model could significantly help consumers lower the cost of purchasing a vehicle and reduce spending on purchase tax, it said.
The continuation of the purchase tax incentives is a great boon to the shift from fuel vehicles to NEVs and to stimulate auto consumption, NIO said.
Earlier today, China's Ministry of Finance announced that NEVs with a purchase date between January 1, 2024, and December 31, 2025, will be exempt from vehicle purchase tax, but the tax exemption will not exceed 30,000 yuan ($4,170) per vehicle.
For NEVs with a purchase date between January 1, 2026 and December 31, 2027, the vehicle purchase tax will be levied at half the normal rate, with the tax reduction not exceeding RMB 15,000 per vehicle.
The latest policy continues to provide additional support for models like NIO that are battery swap enabled.
When consumers purchase a NEV, if the invoice for the car and the battery are separate, the taxable price is the price of the body without tax, according to the Ministry of Finance's announcement.
NIO's (NYSE: NIO) peer Li Auto (NASDAQ: LI) also voiced support for the new policy earlier today.
Li Auto aims to reach annual sales of 1.6 million vehicles and annual revenue of RMB 500 billion by 2025, Li Xiang, the company's founder, chairman and CEO, wrote on Weibo.
China has provided an additional four years of stable policies, which is great and leaves Li Auto's team with no excuse not to meet its strategic goals for 2025, Li said.
By early 2026, Li Auto's ability to meet the goal will be proven, he said.
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BREAKING: China extends full purchase tax exemption for NEVs until end of 2025
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China's cumulative tax exemptions for NEVs exceed RMB 200 billion by the end of 2022.
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China today clarified its future purchase tax policy for new energy vehicles (NEVs), which is expected to exempt the industry from paying more than $70 billion in taxes over the next four years.
According to preliminary estimates, China's vehicle purchase tax exemptions will total RMB 520 billion yuan ($72 billion) from 2024-2027, Vice Minister of Finance Xu Hongcai said at a press conference today.
China will exempt NEVs with a purchase date between January 1, 2024 and December 31, 2025 from vehicle purchase tax, but the tax exemption for each new energy passenger vehicle will not exceed RMB 30,000, according to an announcement released today by the Ministry of Finance.
For NEVs with a purchase date between January 1, 2026 and December 31, 2027, the vehicle purchase tax will be levied at half the normal rate, with the tax reduction not exceeding RMB 15,000 per new energy passenger vehicle.
To support the development of energy-efficient vehicles, China first began exempting NEVs from purchase tax in 2014, a policy that has been extended several times in the past few years.
The standard vehicle purchase tax in China is 10 percent, which is what traditional internal combustion engine (ICE) vehicles currently face.
By the end of 2022, the cumulative size of China's tax exemption for NEVs exceeded RMB 200 billion, and the annual tax exemption is expected to exceed RMB 115 billion in 2023, Xu said in the press conference.
The vehicle purchase tax exemption policy brings more direct feelings to consumers and has a clear effect on promoting the development of the NEV industry and expanding consumption, he said.
The latest policy will have no effect on NEVs priced below RMB 300,000, and the parts exceeding RMB 300,000 will be subject to vehicle purchase tax, he said.
According to 2022 data, new energy passenger vehicles priced at RMB 300,000 and below account for roughly 87 percent of production, and these limits, in general, will have little impact on consumers and the market, according to Xu.
In addition, Chinese Vice Minister of Industry and Information Technology Xin Guobin said in the press conference that the country welcomes investment from companies from various countries and supports their cooperation with Chinese companies in areas such as solid-state batteries and autonomous driving.
At the same time, China also supports local companies to invest and build factories outside the country to bring China's advanced technologies and products abroad, so that people in more countries can enjoy the fruits of technological progress, Xin said.
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BREAKING: China extends full purchase tax exemption for NEVs until end of 2025
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China today released details of its policy to extend the purchase tax exemption for new energy vehicles (NEVs), clarifying the timeline for the policy's withdrawal.
China will exempt the purchase tax on NEVs with a purchase date between January 1, 2024, and December 31, 2025, but the tax exemption will not exceed RMB 30,000 yuan per vehicle, according to an announcement issued today by China's Ministry of Finance.
For NEVs with a purchase date between January 1, 2026 and December 31, 2027, the vehicle purchase tax will be reduced by half, with the tax reduction not exceeding RMB 15,000 per vehicle.
China NEV insurance registrations for week ending Jun 18: Tesla 14,500, Li Auto 7,800, NIO 2,000
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China's State Council Information Office will hold a briefing at 10 am Beijing time on June 21 on promoting the development of the NEV industry.
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China is expected to introduce policy initiatives to promote the "high-quality development" of the new energy vehicle (NEV) industry in recent days, local media China Securities Journal said in a report today.
The report did not mention details about the possible policies.
A notice posted on the website of China's State Council Information Office today shows it will hold a regular briefing at 10 am Beijing time on Wednesday, June 21, to introduce the promotion of "high-quality development" of the NEV industry and answer reporters' questions.
China's current policy to support the NEV industry is mainly the exemption of purchase tax.
In order to support the development of energy-efficient vehicles, China first started to exempt NEVs from purchase tax in 2014.
The policy originally expired at the end of 2017, but was renewed before its expiration until the end of 2020. In March 2020, China renewed the policy again until the end of 2022.
On September 26, 2022, several Chinese government departments announced in an official announcement that the purchase tax exemption for NEVs would continue until the end of 2023.
On June 2, a Bloomberg report said that China was considering extending the tax exemption for cheaper NEVs for another four years.
One of those measures could be extending the purchase tax exemption for electric and plug-in hybrid vehicles that cost less than 300,000 yuan ($42,910), according to the Bloomberg report.
Hours after that Bloomberg report was published, state broadcaster CCTV reported that a State Council meeting mentioned that China would extend and optimize the vehicle purchase tax exemption for NEVs.
The upcoming press conference on June 21 may be related to the extension of the NEV purchase tax exemption policy.
Before this year, China also offered state subsidies for NEV purchases, and they were not renewed when they expired at the end of last year, although some local governments have offered subsidies to local residents for their purchases from time to time.
Following the withdrawal of state subsidies, growth in China's NEV industry has slowed significantly so far this year.
From January to May, retail sales of NEVs in China were 2.42 million units, up 41.45 percent year-on-year, according to the China Passenger Car Association (CPCA). For comparison, the growth rate for the same period last year was 117.21 percent.
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China to extend and optimize NEV purchase tax exemption policy, says State Council meeting
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The moves include holding auto festivals in 100 cities and promoting consumption of NEVs in rural areas.
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China has launched a nationwide promotion covering the rest of the year to boost auto consumption, which is critical to economic growth.
The Ministry of Commerce (MOC) announced specific arrangements in a notice issued today on a campaign to promote auto consumption, including holding auto festivals in 100 cities and promoting new energy vehicle (NEV) consumption in rural areas.
The MOC will promote local governments and enterprises to introduce initiatives to support auto consumption, use local financial resources, and encourage financial institutions to introduce auto credit financial support measures, according to the notice.
The MOC will organize the launch of the NEV consumption season campaign in the near future and guide various NEV consumption promotion activities in rural areas.
Car companies are encouraged to launch practical models suitable for rural areas, and the MOC will coordinate and promote the improvement of charging infrastructure systems in rural areas.
The China Association of Automobile Manufacturers (CAAM) was asked to organize auto companies to participate in these activities and to introduce preferential initiatives for car purchases, according to the notice.
At the same time, the notice stressed that local government departments should do their part in reviewing fair competition for support policies, including subsidies, that are planned to be introduced to ensure they are universally applicable to all enterprises.
The campaign will run from June to December, according to the notice.
The move comes at a time of weak growth in Chinese auto sales, with the sector facing challenges after state subsidies expired at the end of last year.
China's retail sales of passenger cars rose 28.6 percent to 1.74 million units in May, up 7.3 percent from April, according to data released earlier today by the China Passenger Car Association (CPCA).
From January to May, China's passenger car retail sales were 7.63 million units, up 4.39 percent year-on-year.
NEVs fared slightly better, but at a significantly lower rate than last year.
Retail sales of new energy passenger vehicles in China were 580,000 units in May, up 60.9 percent year-on-year and up 10.5 percent from April, according to the CPCA.
From January to May, retail sales of passenger NEVs in China were 2.42 million units, up 41 percent year-on-year. For comparison, last year's January-May passenger NEV retail sales grew 117.21 percent year-on-year.
China NEV retail up 10.5% MoM to 580,000 in May, CPCA data show
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