Tax incentive extension to continue spurring China's NEV growth

Guo Zi handed over the keys to a Wuling Air EV car to the buyer on Thursday, closing her first sale of a new energy vehicle (NEV) in 2023.

"I sold more than 380 NEVs in 2022," said Guo, a top sales representative at a retail dealer of SAIC-GM-Wuling (SGMW), a major Chinese automobile manufacturer, in the city of Liuzhou, south China's Guangxi Zhuang Autonomous Region.

"The purchase tax exemption for NEVs really reduces consumers' costs, which, in addition to high gasoline prices, has been an important factor drawing customers to NEVs," she said, adding the dealer saw people flocking in for inquiry during the New Year holiday.

China announced in September last year that the purchase tax exemption for NEVs would be extended to the end of 2023. The third extension since the country first implemented the policy in 2014, was expected to waive 100 billion yuan (US$14.8 billion) worth of taxes.

As of November 10, a total of US$10.13 billion worth of taxes had been exempted in 2022, up 101.2 percent year on year, according to the State Taxation Administration.

After a government subsidy program for NEVs terminated on December 31, 2022, which was first put in place in 2010 to stimulate the popularity of NEVs, "auto companies may adjust NEVs' selling prices based on assessments of the market, but the extension of the tax exemption remains bullish news for the sales of NEVs," said Wang Weisen, deputy general manager of the sales company of SGMW.

Boosted by incentive policies, China has seen a continued positive trend in domestic sales of NEVs, Wang noted.

From January to November 2022, NEVs sales of SGMW rose 32.5 percent year on year to reach 519,327 units.

BYD, China's largest NEV manufacturer, said its NEV sales jumped 208.64 percent year on year to over 1.86 million units in 2022.

For startup carmakers like Li Auto and NIO, 2022 was also a fruitful year. Li Auto delivered 133,246 NEVs last year, up 47.2 percent from the 2021 level. NIO delivered 122,486 units in the same period, an annual increase of 34 percent.

In the first 11 months of 2022, the country's NEV sales exceeded 6.06 million units, with the market share of such vehicles hitting 25 percent, according to the China Association of Automobile Manufacturers (CAAM).

A slew of policies rolled out by the authorities to stimulate consumption has evidently helped to revive the growth of the auto market, said Chen Shihua, deputy secretary-general of the CAAM.

A strong growth momentum has been sustained in the production and sales of NEVs, Chen said. "Judging from the sales volume of NEVs, the purchase tax exemption has been recognized by the market."

The CAAM has forecast that China's NEV sales for 2023 would grow 35 percent year on year to 9 million units, compared to an estimated 6.7 million units for 2022.

The NEV subsidy program had made significant contributions to the rapid development of China's passenger vehicle industry, said Cui Dongshu, secretary-general of the China Passenger Car Association.

Despite the end of the subsidies, the country's NEV sector will continue to develop in a sound environment, Cui added.

"The extension of purchase tax exemption will continue to drive the growth of NEVs sales. In the future, China's NEV sector will maintain high growth," Cui said.