A senior official from China’s leading auto industry association has urged the government to slow the pace of phasing out purchase tax incentives for new energy vehicles (NEVs), suggesting a reduced tax rate in 2026 and 2027 to ease pressure on the market.
Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers (CAAM), proposed setting the NEV purchase tax at 3% in 2026 and 7% in 2027, compared with the currently planned 5% rate for both years. He made the remarks during the 2025 automotive industry statistical annual report conference in Changsha, Hunan, according to a CAAM WeChat post.
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Chen said the domestic auto market continues to face weak demand, high inventory levels, and profitability challenges, compounded by price competition, supply chain disruptions, and geopolitical uncertainties. He added that China should continue implementing measures to stabilize economic growth while further unlocking market potential.
Beijing announced in June 2023 that it would extend NEV purchase tax exemptions for four years, gradually reducing their scope. NEVs remain exempt from purchase tax through 2025, capped at 30,000 yuan ($4,210) per vehicle. From 2026 to 2027, the rate will fall to half the standard 10% vehicle tax, capped at 15,000 yuan.
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Unless adjustments are made, the effective rate for those two years will remain 5%. To cushion the phase-out’s impact, automakers such as Nio, Li Auto, and Xiaomi have introduced incentives and promotional measures to sustain sales momentum.
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