China Exempts Electric Vehicles From 10% Purchase Tax

JUL 22 2014 BY ERIC LOVEDAY 14

DENZA EV IN Beijing

InsideEVs Catches A DENZA EV Presentation In Action Earlier This Year I Beijing For Auto China 2014

Spotted: A Tesla Model S In China

Spotted: A Tesla Model S In China

As we’ve detailed in the recent past, China is taking some significant strides to support the roll out of electric vehicles.

The latest move by China is to waive a 10 percent purchase tax on electric vehicles  “as part of expanded measures to combat pollution and cut energy dependence,” according to Bloomberg.

Bloomberg adds:

“New-energy autos — China’s term for electric cars, plug-in hybrids and fuel-cell vehicles — will be excluded from the levy from Sept. 1 to the end of 2017.”

Han Weiqi, a Shanghai-based analyst at CSC International Holdings, stated:

“The exemption will help spur demand for electric cars and plug-in hybrids by lowering the purchase cost.  Still, it remains to be seen whether the latest measure will have a decisive impact given other types of funding have been in place.”

The tax exemption applies to all plug-in vehicles, including those imported from other countries, such as the U.S.-made Tesla Model S.

Source: Bloomberg

Categories: General

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14 Comments on "China Exempts Electric Vehicles From 10% Purchase Tax"

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Micke Larsson

Any bets on which month will be the first that China is the country that is selling the most EV’s?

I’ll put a fiver on May 2015.

Alonso Perez

So Tesla sales will drop to zero for the next month or so, but then should be quite strong.

The entire discount should flow through to the price. I’m just not sure where the 10% is applied (before or after other taxes), so we will need to see what the exact new price is.

Micke Larsson

Chinese Tesla customers are hardly price sensitive. Plus we won’t see an eventual drop in sales since they have a back log of deliveries that surely is much higher than the allocation of Teslas avaliable for China.

Boris

I still don’t get why Elon isn’t charging the Chinese more, unless there was some backstage deal of some sort. He’s passing up on so much margin that BMW, MB and Audi is all cashing in on, plus he’s devaluing his brand in China.

Micke Larsson

Maybe because he is a decent human being and because he has a conscience. Overcharging just because you can get away with it not ethical at all.

Profit at any cost is just so sad. Companies have a much bigger responsabilities than that, but not all step up.

Boris

Come on now, are we really going to bring ethics here. Is doing business in China, Russia, Africa ethical? It’s corrupt from bottom to top. Is importing goods from China ethical? Child labor, people working like slaves, does it ring a bell? Those high ranked people who buy luxury cars in China are probably the least ethical ones out there. And exactly, Tesla has a much bigger responsibility and charging the Chinese more would be the best thing it could do to stay alive, do good financially so it changes this planet (not just environmentally, but also politically) quicker.

Micke Larsson

Doing business in China, Russia and Africa can be unethical and ethical depending on how you do it.

You don’t change the world by being as bad as the ones that are unethical. You do it by being ethical yourself and by trying to spread that notion.

Tesla has a big responsability and goal to change the world environmentally. But you don’t do that by stepping away from your values.

Tesla could make more money by doing unethical things but that would only make them part of the problem and not part of the solution.

And if you want another reason then a low price will make sure they get as many sales as they can in China so that they can grow as fast as possible on the worlds largest and most important car market.
Which will give them a reason to put a factory in China as fast as possible which will lower the price (but not the profit) a lot more which will of course make them sell in even larger numbers.

sven

“. . . put a factory in China as fast as possible which will lower the price (but not the profit) a lot more. . . .”

No, the profit per car will also decrease. Putting a factory in China will cut Tesla’s profit per car in half, because the Chinese government forces all foreign auto manufacturers who build factories in China to form a joint venture with a Chinese company which would own 49% of the joint venture.

Micke Larsson

Point taken. Change that to a higher total profit because of massive sales instead. Anyway, it was just a way to give Boris an economical reason for what Tesla did.
It is sometimes easier to understand than that a company actually can do good things just for the sake of being a good company and good human beings. 🙂

Mint

You underestimate how savvy multinational businesses are.

You know how companies dodge income taxes in the US? They sell parts or IP between the branches at strategic prices. Google America leases services and equipment well below cost to Google Bermuda, and revenues from the latter are nearly pure profit taxed at 0%.

Tesla could do the opposite here. They’d build the factory in China, have it buy some parts from the US (e.g. batteries from the gigafactory) at high prices, and then the Chinese factory shows next to zero profit. The Tesla USA then gets all the profit from the Chinese sales.

In the end, though, Tesla isn’t going to be showing big profits for a long time. They’re a growth company.

Boris

Hi Mikael,

I think Tesla is trying to be fair. I don’t think the world ethical belongs in this conversation. Charging someone 3 Euros for bottled water at the beach vs. 1 Euro at the grocery story is also not unethical, it’s just a demand and supply issue. So it would be the same with Tesla cars in China. What Elon tries to do is to be fair to all and OK, it’s his concept and he’s standing behind it.

When you say you can do ethical business in the places I’ve mentioned, I don’t agree. If you want to sell/buy do really anything in those countries, there is a line of people with high expectations, so ethics would work somewhat like this:

Unethical business: Huge briges to everyone, poluting like crazy, threatening to physically hurt employees who don’t want to work 16 hours a day

Ethical business: Hiring a “consulting firm” which takes care of bribes, not working people over 14 hours a day, no physical punishment

If a company is not willing to do this, there is no business for this company at all, period.

Mint

Tesla’s ethics are a marketing point, just like their open patent philosophy (many of their patents were not related specifically to EVs).

Charging everyone the same price plus duties/taxes/shipping is one of the ways they keep their good-guy image.

Josh Bryant

This.

Musk clearly stated that Tesla wants to make the same amount of profit for every Model S coming off the line, regardless of where it gets sold. It is a great stance and will actually point to where EVs make the most economic sense (after local incentives).

This policy builds trust with the customer also, just like the fixed price policy Tesla employs. Everyone that purchases from Tesla feels like the got a fair deal. Compare this to the sales experience they are battling against.

Micke Larsson

What some people forget is that there actually exist good guys for real in the world. Not every corporation or person would sell their own grandma or kids to organ harvesters just because the money offered is big.

Of course marketing and image can be a big motivator but there are plenty of companies who do great things with little or none recognition for it.