China has decided to extend support for New Energy Vehicle (NEV) market for a little bit longer, probably to avoid any more drama in an already challenging economic situation.
According to CnEVPost, China's Ministry of Finance, Ministry of Industry and Information Technology (MIIT) and State Taxation Administration announced in a joint statement that NEVs - mainly all-electric and plug-in hybrid cars, but hydrogen fuel cell cars also count - purchased between January 1, 2023 and December 31, 2023, will be exempt from purchase taxes.
The incentive was initially introduced in 2014 and then extended a few times and set to expire at the end of 2022. The latest decision means an extension of another year, to 2023, which was indicated as a possibility.
According to the Chinese media, the value of the incentive is about 10,000 yuan ($1,400), so not something that would be fundamental. On the other hand, the Chinese government probably prefers to enter smoothly into 2023, considering all the difficulties in 2022. Even conventional models got some tax reductions in recent months.
The article says that during the first seven months of the year, the total exemption for NEVs amounted to 40.7 billion CNY ($5.7 billion), which is 108.5% more than a year earlier. That's for some 2.8 million plug-in cars.
The China Passenger Car Association (CPCA) expects that some 6 million plug-in passenger cars might be sold in China in 2022 (plus commercial vehicles on top of that). After August, the tally is at 3.4 million, so with four months to go, the average would have to be at 650,000 per month. It's possible, considering over 550,000 in August and strong growth.
China remains not only the largest plug-in electric car market globally but also appears to be expanding its share beyond 50% in recent months. One of the reasons behind it might be a slower growth in Europe, which faces energy and supply chain issues, caused by the Russian invasion of Ukraine.