China's policy is expected to exempt about RMB 100 billion of NEV purchase taxes next year.

From January to July, China exempted RMB 40.68 billion ($6 billion) worth of new energy vehicle (NEV) purchase taxes, up 108.5 percent from the same period last year, the official Xinhua News Agency said Thursday, citing data from China's State Taxation Administration.

In July, the amount was RMB 7.17 billion, up 119.1 percent from a year earlier, according to the report.

In the first seven months, China's sales of NEVs reached 3.194 million units, up 120 percent year-on-year, according to data previously released by the China Association of Automobile Manufacturers (CAAM).

China's July NEV sales at 593,000 units, largely flat from June, CAAM data show-CnEVPost

At an executive meeting of China's State Council held on August 18, the country decided that the current policy, which has been extended twice and expires at the end of this year, will be extended again by the end of next year, the report noted, adding that the move is expected to exempt about RMB 100 billion in purchase taxes on NEVs next year.

To support the development of energy-efficient vehicles, China first began exempting NEVs from purchase taxes in 2014.

Vehicles that can benefit from the policy include pure electric vehicles, plug-in hybrids, and fuel cell vehicles, and all car companies, whether local or foreign, are included.

The policy originally expired at the end of 2017, but was extended to the end of 2020 before it expired, and in March 2020, China renewed the policy until the end of 2022.

Based on the average price of RMB 130,000 for NEVs in China, the RMB 100 billion tax exemption for next year would correspond to about 8-9 million NEVs, Jiemian reported on Monday, citing Cui Dongshu, secretary-general of the China Passenger Car Association, as saying in a report Monday.

Based on the price of a NEV of RMB 150,000 yuan, consumers would receive a tax break of about RMB 13,300 yuan, Cui said, adding that this reflects China's support for the NEV industry.

The brands with the highest sales in China's NEV market are the ones that will benefit the most.

is now the largest local NEV company in China, with NEV sales reaching 803,880 units from January to July, up 292 percent from 205,071 units a year earlier, according to data previously released by the company.

was also one of the top-selling brands, with 206,036 retail sales in China from January to July, up 48 percent from 139,646 units in the same period last year, according to data from the CPCA monitored by CnEVPost.

It is worth noting that with the rapid growth of NEV sales in China, the purchase tax exemption is unlikely to continue forever.

In the future, as ownership of conventional internal combustion engine vehicles shrinks dramatically, the shortfall in state tax revenue will need to be filled by a tax system for electric vehicles, the CPCA said in a report released on August 9.

Taxing the purchase and use of electric vehicles and even their end-of-life is an inevitable trend, the CPCA said.

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