A statement from the Ministry of Industry and Information Technology and State Administration of Taxation has confirmed that China has introduced an exemption from the present 10 percent purchase tax for electric vehicles, with effect from September 1, 2104.
The new measure, which was first announced in July this year, is being seen as a vital element within the Government's environmental protection policies, by reducing China's dependence on fossil fuels and cutting air pollution, but the tax break also forms part of efforts to support the development of a Chinese new-energy automotive industry and increase domestic demand for such vehicles.
On August 27, the two agencies issued a notice that listed the make and model of the first 17 vehicle types to take advantage of the tax break. Those vehicles are from domestic manufacturers, although, when the policy was first disclosed, it was stated that the exemption will be available for all new-energy vehicles, whether produced domestically or imported, to the end of 2017, and further models are expected to be added to the list as the Ministry monitors the success of the program.
It is hoped that the Chinese car market, the world's largest at 18m, will see a total of at least 5m environmentally-friendly vehicles on the roads by 2020. However, with an estimated 16,500 new-energy cars being sold in the country in the first half of this year, an increase from around 7,300 in the same period of 2013, sales are still lagging far behind Government's target of 500,000 such vehicles on Chinese roads by the end of next year.
The Government has also offered various subsidies against the purchase price of new-energy vehicles (not for imports) since 2010, reaching up to a price deduction of RMB114,000 (USD18,550) for an electric vehicle in Beijing, and has recently ordered public institutions to use more electric and plug-in hybrid cars.
In addition, it has been reported that the Government is considering an additional tax on gasoline, so as to try and shift Chinese consumers' continuing preference for traditionally-fuelled cars, and counteract the low uptake of environmentally-friendly vehicles caused by their high production cost and price, even with the subsidy.
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