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China is taking its plug-in car incentives to the next level. The government will inject 520 billion yuan ($72 billion) into tax breaks for new energy vehicles (NEVs) to bolster sales, which briefly showed signs of slowing down earlier this year.
The credit will extend to NEVs bought in 2024 and 2025, amounting to as much as 30,000 yuan ($4170) per vehicle, reported Reuters. The Chinese Ministry of Finance stated that cars purchased in 2026 and 2027 can qualify for half the amount, as the exemption will be capped at 15,000 yuan ($2090).
The new four-year package will continue extending to all-electric vehicles, plug-in gas-electric hybrids and hydrogen fuel-cell vehicles. Vice Minister of Finance Xu Hongcai stated in a press briefing that cumulative NEV tax breaks amounted to more than 200 billion yuan ($27.8B) as of 2022. The 520 billion yuan package is the biggest ever, he added.
For more than a decade, China pumped billions of dollars into its EV expansion plans, which gave rise to what is now the world’s largest electric vehicle market. However, the subsidies expired at the end of 2022.
In January 2023, plug-in car sales were down by 8 percent in China year-over-year, but bounced back in March, with a 23 percent jump compared to the year before. Tesla’s price cuts may have contributed to the sales revival after the brief slump, as it prompted Mercedes-Benz, Volkswagen, Nio and Xpeng among other carmakers to offer discounts as well.
Plug-in vehicle sales in China are unlike anywhere else in the world. Nearly 6 million plug-in vehicles were sold in the country in 2022, accounting for one-third of its total vehicle sales. Some of the top players in the Chinese EV market include Warren Buffet-backed BYD, the SAIC-GM-Wuling joint venture, Tesla, and GAC among others.
The BYD Song Plus was China’s best-selling model in Q1 2023, followed by Tesla Model Y and BYD Qin Plus in the second and third spots. Six of the top ten best-selling plug-in cars in Q1 2023 were BYD models.
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