China will establish a coordination mechanism for the development of the NEV industry and will vigorously build charging piles.

(Image credit: CnEVPost)

Late last month, a top Chinese government meeting confirmed that the policy of exempting new energy vehicles (NEVs) from purchase tax would be extended, but no specific deadline was mentioned. Now, the same meeting has made that clear.

China will extend the policy of NEV purchase tax exemption until the end of 2023, mentioned the State Council executive meeting hosted by Premier Li Keqiang today, according to a CCTV report.

China has decided to continue the implementation of policies such as exemption of vehicle purchase tax for NEVs to promote the consumption of bulk products, according to the report.

China will establish a coordination mechanism for the development of the NEV industry, using a market-based approach to allow the best car companies to win and the laggards to exit, and back the development of supporting industries, the report said.

The country will also vigorously build charging piles and support them through policy-oriented financial instruments, the report said.

To support the development of fuel-efficient vehicles, China first began exempting NEVs from purchase taxes in 2014, allowing most consumers who buy such vehicles to save about 10,000 yuan ($1,580) relative to those who buy traditional fuel vehicles.

Vehicles eligible for the policy include pure electric vehicles, plug-in hybrids, and fuel cell vehicles.

The policy originally expired at the end of 2017, but was extended to the end of 2020 before it expired, and in March 2020, China extended the policy again to the end of 2022.

It is worth noting that the renewal of the purchase tax exemption for NEVs is not surprising, considering that the purchase tax on traditional internal combustion engine (ICE) vehicles has been reduced.

Between June 1 and December 31, China will reduce by half the vehicle purchase tax on passenger vehicles with a price not exceeding RMB 300,000 and a displacement of 2.0 liters or less.

Prior to the policy change, China's purchase tax rate for ICE vehicles was 10 percent.

CPCA says purchase tax on NEVs will be inevitable in China