China may extend EV tax break as it tries to spur car sales

Tesla China store
Image via Ray4Tesla /Twitter

The Chinese government has announced it would consider extending a tax break that has been helping electric vehicle (EV) owners reduce the cost of acquisition of their electric cars. The tax break was first introduced in 2014, and the plan to reinstate it next year may now be scrapped.

Apart from extending the tax break, China has announced new initiatives to make EVs more attractive. These include setting up more public charging stations and ensuring charging costs are not high. Private companies are also rapidly expanding their charging network, including Tesla, which added 200 Supercharging stations in the first half of 2022.

The new incentive scheme includes cutting auto purchase tax by half to 5 percent for cars costing less than 300,000 yuan (US$45,000) and equipped with at most 2.0-liter engines, according to Reuters.

The China auto market experienced a slump in the first half of 2022 due to strict lockdowns in some parts of the country. However, the auto purchase tax cut may help the market bounce back, as it is already reflected in sales data. Car sales increased by 22 percent year-on-year in June to 1.9 million units.

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Electric vehicle sales have enjoyed massive growth in China, jumping 130 percent to 546,000 units last year. BYD emerged as one of the top performers, with some media outlets declaring it overtook Tesla. In reality, it didn’t sell as many battery-electric vehicles as the American company. Tesla sold 78,000 EVs in China in June.

Meanwhile, China has not said anything about extending the subsidies on NEVs (new energy vehicles). However, as we reported earlier this year the government was talking with automakers about the program’s fate and extending it beyond 2022.