2023-06-21 11:56:00
China unveils unprecedented subsidy plan
China announced on Wednesday, June 21, 2023 a package of tax incentives totaling 66.16 billion euros (520 billion yuan) between 2024 and 2027, intended for electric vehicles (EV) and hybrids. This measure, the largest ever granted to these types of vehicles, aims to stimulate declining automobile sales. Electric and hybrid vehicles will be exempt from the purchase tax of 30,000 yuan per vehicle in 2024 and 2025, an exemption that will then be halved and capped at 15,000 yuan for purchases made in 2026 and 2027.
These tax incentives put green vehicles at the forefront of a broad campaign to kick-start Chinese growth. In recent years, the government has strongly promoted green vehicles through incentives that have supported the development of local players such as Li Auto, NIO and BYD. Analysts suggest capping tax exemption will help boost sales of cheaper models produced by Chinese companiesrather than the sales of high-end vehicles from foreign manufacturers.
Ongoing support for electrification
China supported electric vehicle purchases for more than a decade, but the program ended last year. The new measures extend the existing tax exemption, which is supposed to expire at the end of 2023. Since 2014, the tax package targeting electric vehicles has topped 200 billion yuan (25 billion euros), underscoring the country’s continued commitment to electrification.
Sales of electric vehicles rose 10.5% in May 2023 from the previous month, according to data from the China Passenger Car Association (CPCA), and were up 60.9% year on year. This upward trend is likely to continue, with forecasts indicating an increase in electric vehicle sales of 30% in 2024.
The implications of China’s aid for the auto industry
This Chinese initiative is part of a broader context of global ecological transition. Many governments around the world are putting in place measures to encourage the adoption of electric vehicles, with the aim of reducing greenhouse gas emissions and combating climate change. China, as the world’s largest automotive market, plays a key role in this transition. The measures taken by the Chinese government might have a significant impact on the global automotive industry and accelerate the shift to more sustainable mobility.
However, the transition to electric vehicles is not without challenges. Charging infrastructure remains insufficient in many regions, and questions regarding the supply of battery materials, such as lithium and cobalt, remain. Moreover, the generation of electricity needed to power these vehicles must also become greener so that electric vehicles can truly contribute to the fight once morest climate change.
Despite these challenges, China’s announcement is a positive sign for the future of electric vehicles. It shows that governments are ready to invest heavily in this technology and to support the automotive industry in its transition to greener solutions.
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