Beijing extends subsidies, tax exemption for EVs; cuts VAT on used vehicles

The Chinese government has decided to extend current subsidies and tax exemptions on electrified vehicles while slashing value-added taxes on used-vehicle sales to stimulate light-vehicle demand. 

The subsidies for domestically built electrified vehicles, previously set to be phased out by the end of 2020, will be maintained for two more years, the State Council, China’s cabinet, said Tuesday.

Electrified vehicles will also continue to be exempt from a 10 percent sales tax through the end of 2022. 

The VAT slapped on secondhand-vehicle sales will be cut to 0.5 percent from 2.0 percent now, starting May 1 and running until the end of 2023. 

To reduce vehicle emissions in China’s capital city of Beijing and neighboring Tianjin city and Hebei province, the government also is rolling out a bonus program for scrappage of local diesel trucks with emissions standards falling short of State 3 requirements, which are equivalent to the Euro 3 emission rules. 

Details on the bonus program have not been disclosed. 

After Beijing scaled back subsidies for electrified vehicles in June 2019, electric passenger vehicles have qualified for subsidies of up to 25,000 yuan ($3,521) while plug-in hybrids are eligible for a flat subsidy of 10,000 yuan.

Because of lower subsidies and the coronavirus outbreak, total electrified-vehicle sales in China slipped 60 percent to 59,534 in the first two months of the year. The tally includes 44,557 EVs and 14,977 plug-in hybrids, according to the China Association of Automobile Manufacturers. 

Used-vehicle deliveries, hit particularly hard by the viral outbreak, slumped 47 percent to less than 1.06 million in January and February, the China Automobile Dealers Association said.