Shanghai (ZXZC)- China has determined to extend the validity period of the subsidies on new energy purchases and NEV purchase tax exemption for two years, state media reported on March 31, quoting an executive meeting of the State Council chaired by Chinese Premier Li Keqiang.

China’s auto industry is calling for governmental incentives to help boost car sales, as the coronavirus depressed the world's largest auto market. For the first two months, China saw its auto sales slump 42% over a year ago to 2,238,000 units. Before that, the country had experienced two consecutive years of sales downturn.

The extension of NEV subsidies and purchase tax exemption is expected to help China maintain its leadership in the global NEV domain. Due to the coronavirus spread and the Spring Festival, China’s NEV sales plunged 59.5% year on year to 59,705 units in the first two months. Although the government is pushing ahead with the phase-out of NEV subsidies, the tried-and-true approach might be useful to stabilize the NEV consumption during the virus-hit days.

The State Council still approved other stimulus policies for the car sales good. The Central Treasury will, by means of “replacing subsidies with rewards,” support key regions like Beijing, Tianjin, and Hebei in scrapping diesel trucks under the China Ⅲ emission standard or below. Besides, the pre-owned car dealers are allowed to pay VAT at 0.5% of their sales, effective from May 1 to the end of 2023.

A number of municipal governments in China have rolled out substantial measures to spur local car consumption, of which offering subsidies is the most adopted one. From the time being, such cities as Foshan, Guangzhou, Changsha, Zhuzhou, Xiangtan, Nanchang, Zhuhai, Chongqing, Changchun, and Ningbo have all announced policies about cash handouts.