China’s $72 billion tax break for electric vehicles (EVs) and green cars aims to stimulate demand and address the recent slowdown in the country’s auto market. The tax package, announced on June 20, 2023, will exempt the purchase tax for new energy vehicles (NEVs) for two years, beginning in 2024. Subsequently, in 2026 and 2027 the exemption will be halved.
This initiative is aligned with China’s commitment to reducing air pollution and promoting sustainable development. By boosting demand for EVs and green cars, the government seeks to accelerate the transition towards cleaner transportation.
Prominent Chinese brands like BYD, Geely, and NIO, and international manufacturers such as Tesla and BMW, stand to gain. Additionally, the tax incentive is likely to drive the development of EV charging infrastructure across China.
The tax break is part of a broader government strategy to support the EV industry. Over the years, China has implemented various policies, including subsidies, tax breaks, and charging infrastructure construction, to encourage EV adoption.
China’s ambitious goal is to have 120 million NEVs on the roads by 2030, making the tax break a crucial measure to facilitate achievement of this target.
Key points of the tax break include:
- Purchase tax exemption for NEVs for two years, starting in 2024.
- Halving of the exemption in 2026 and 2027.
- Applicable to all NEV types, including passenger cars, SUVs, and vans.
- Benefits for both domestic and foreign automakers.
- Expected boost to EV charging infrastructure development in China.
The tax break represents a significant step by the Chinese government to promote the use of EVs. It is anticipated to have a positive impact on the EV market, fostering the transition towards a more sustainable transportation system in China.
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