Buying environmentally friendly cars, China prepares 72billion tax breaks

China chasing a new boom in green car purchases

In recent years the purchase of environmentally friendly cars cars in China has marked real market records. Thanks to generous government incentives and tax breaks that have supported the market. To the point that in 2022, in spite of the heavy restrictions against the COVID-19, in the Country the sales of battery electric cars have grown by 60% compared to 2021, reaching 4.4 million units; those of plug-in hybrids have almost tripled to 1.5 million. A race that has made China the queen of e-mobility: for the first time last year it accounted for over 50% of all electric cars in circulation worldwide, for a total of 13.8 million.

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But with the end of subsidies, sales in 2023 fell dramatically. To repair the damage, the government has presented a package of 520 billion yuan (72.3 billion dollars) to stimulate the sector. The initiative extends the tax exemption on the purchase of environmentally friendly cars, which ended last September. In detail, the “new energy vehicles” – this is the label given by Chinese policies on battery, plug-in and hydrogen -, if bought in 2024 and 2025, will be completely exempted from the purchase tax of 30,000 yuan per vehicle. The exemption will be halved for purchases made in 2026 and 2027.

China’s goals on e-mobility

It is difficult to understand now what will be the effects on the market and whether China will be able to maintain the trend of past years. However the move of the Government has had direct repercussions on the stock exchange, as reported by Reuters. Chinese automotive stocks increased after the announcement, with NIO and Xpeng electric vehicle manufacturers experiencing increases of 6.1% and 5.5% respectively. Li Auto also went up 3.5%.

Recall that the People’s Republic has set itself the goal of reaching, by 2030, a 50% share of electric cars in sales in the so-called “key regions for air pollution control” and 40% throughout the country. According to the IEA, if the growth rate is the same as in the past, targets will be completed well before the deadline.