China is intensifying its efforts to promote plug-in cars by implementing even more substantial incentives and support measures.
The government intends to allocate 520 billion yuan ($72 billion) towards tax incentives aimed at boosting the sales of new energy vehicles (NEVs), which experienced a temporary slowdown earlier this year.
Generous Incentives for NEV Buyers in China
These financial credits will be applicable to NEVs purchased in 2024 and 2025, providing up to 30,000 yuan ($4,170) per vehicle.
The Ministry of Finance in China has stipulated that vehicles purchased in 2026 and 2027 will qualify for a 50% reduction in the incentives, capped at a maximum exemption of 15,000 yuan ($2,090). This inclusive four-year program encompasses a wide range of vehicles, including all-electric, plug-in hybrid, and hydrogen fuel-cell vehicles.
During a press briefing, Vice Minister of Finance Xu Hongcai revealed that the cumulative NEV tax breaks had already exceeded 200 billion yuan ($27.8 billion) by 2022, and he emphasized that the 520 billion yuan package is the largest to date.
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Tesla’s Price Reductions Influence Sales Recovery
China has been investing billions of dollars into its electric vehicle expansion plans for over a decade, resulting in the world’s largest electric vehicle market.
After the subsidies came to an end in December 2022, there was an 8 percent decline in plug-in car sales in China in January 2023. However, there was a subsequent recovery in March, with a significant 23 percent increase compared to the previous year.
The subsequent price reductions by Tesla may have played a role in the sales recovery, as it prompted other car manufacturers such as Mercedes-Benz, Volkswagen, Nio, and Xpeng to offer discounts as well.
China’s plug-in vehicle sales are unparalleled globally, with nearly 6 million plug-in vehicles sold in the country in 2022, accounting for one-third of its total vehicle sales.
Prominent participants in the Chinese EV market include BYD, backed by Warren Buffet, the SAIC-GM-Wuling joint venture, Tesla, and GAC, among others.
During Q1 2023, the BYD Song Plus emerged as China’s top-selling model, followed by the Tesla Model Y and the BYD Qin Plus in second and third place, respectively. BYD models accounted for six of the top ten most popular plug-in cars in the first quarter of 2023.
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