China announced on Tuesday an extension of the tax exemption for electric vehicles (EVs), which it calls new energy vehicles (NEVs). This tax break, which was initially set to expire on December 31, 2023, will now remain in place until December 31, 2027.
According to the country’s Ministry of Finance starting from January 1, 2024, the purchase tax exemption on NEVs will continue for four additional years until the end of 2027. However, there will be a change in the exemption amounts, with the amounts decreasing over the years.
Between 2024 and 2025, the total exemption per unit will be capped at 30,000 yuan (C$5,500/US$4,179). From 2026 to 2027, the tax exemption will be reduced by half, with the exemption amount limited to a maximum of 15,000 yuan (C$2,750/US$2,090).
In China NEVs include pure electric vehicles, plug-in hybrid electric vehicles, and fuel cell electric vehicles that meet the country’s specified technical requirements.
This is not the first time China has extended the subsidy program. The program was initially set to close at the end of 2017, but received an extension until the end of 2020 before its eventual expiration. However, in March 2020, China once again decided to extend the policy further, granting an extension until the end of 2022. There had been rumours for several months that China was going to extend it yet again.