The Chinese government announced it would extend incentives for the purchase of new energy vehicles (NEVs) until 2027 to ensure continued strong growth in this increasingly important segment.

A joint statement by the Chinese ministry of finance, the state taxation administration and the ministry of industry and information technology said NEVs bought in 2024 and 2025 would be exempt from all or part of the 10% purchase tax, up to a maximum discount of CNY30,000 (US$4,155) per vehicle. For NEVs purchased in 2026 and 2027, the purchase tax would be halved up to a maximum of CNY15,000.

The current purchase tax incentives were due to expire at the end of 2023. With the domestic economy recovering more slowly from the Covid lockdowns than in many other economies in the region, the government moved to ensure the market’s transition to zero and low-emission vehicles would continue as planned. China has set a target for 40% of vehicle sales in the country to be zero emissions by 2030.

Sales of NEVs rose 47% to 2,940,000 units in the first five months of 2023, according to the China Association of Automobile Manufacturers (CAAM), including a 35% rise in BEVs to 2,146,000 units while sales of plug in hybrids surged 92% to 794,000 units.

That followed an almost doubling of NEV sales to 6,887,000 units last year, with BEV sales rising 84% to 5,364,000 units.