China's latest efforts to extend the tax exemption policy for new energy vehicle purchases are expected to further stimulate consumer buying sentiment and inject strong impetus into the automobile market, industry experts said.
China will extend the exemption of purchase taxes on NEVs, which was originally scheduled to expire by the end of this year, to the end of 2023, according to a notice issued by the Ministry of Finance, the State Taxation Administration and the Ministry of Industry and Information Technology on Monday.
The NEVs include pure electric vehicles, plug-in hybrid electric vehicles and fuel-cell vehicles. The move is expected to bolster the development of the NEV industry and spur consumption of automobiles, said the notice.
The country first began exempting NEVs from purchase taxes in 2014, and this is the third time that the tax-exemption policy has been extended. The latest extension is expected to waive 100 billion yuan ($13.98 billion) in taxes.
China's NEVs segment has witnessed rapid growth this year. Retail sales of NEVs in China surged 111.2 percent year-on-year to 529,000 units in August, according to the China Passenger Car Association.
In the first eight months, retail sales of NEVs in China stood at 3.262 million units, skyrocketing 119.7 percent year-on-year, said the CPCA.
"Currently, sales of NEVs account for about 22 percent of overall auto consumption. The extension of NEV purchase tax exemptions will enhance consumers' purchasing willingness and give a big boost to sales of NEVs," said Zhang Xiang, a researcher at the Automobile Industry Innovation Research Center, which is part of the North China University of Technology in Beijing.
Chinese NEV manufacturers should step up efforts in the research and development of NEVs and launch new models of vehicles, Zhang said, adding that sales of NEVs are mainly focused on first and second-tier cities, but there is plenty of room for growth in lower-tier cities, townships and rural areas.
Wang Tingting, associate economics professor at the Southwest University of Political Science and Law in Chongqing, said extending the purchase tax-free policy is conducive to further unleashing consumption potential, stimulating people's spending on NEVs and promoting production and technological innovation of NEVs.
The market size of China's NEV sector is forecast to reach 15.98 million units in 2026, with a compound annual growth rate of 35.1 percent during the period, according to a report from global market research firm International Data Corp.
Cui Dongshu, secretary-general of the CPCA, said sales in China's NEV market are projected to reach 6.5 million units this year, accounting for about 25 to 26 percent of all vehicle sales.