Purchase taxes for new energy vehicles to be temporarily nullified, hopes to help promote sales

At a recently-held executive meeting, the State Council has decided to cancel all purchase taxes for pure electrics, plug-in hybrids and fuel battery vehicles purchased from September 2014 until the end of 2017. In an interview with the Nanning Evening News, the Nanning Municipal Office of State Administration of Taxation stated that, even though it had not received an official notification from the State Administration of Taxation, once the policy is officially implemented, the city's residents will save over 10,000 RMB in taxes. The city also hopes that the decreased taxes will help stimulate the currently small number of new energy vehicle sales.

The amount of a vehicle purchase tax is currently determined by the product of the vehicle's price times the tax rate, which is typically around ten percent. With most domestically-manufactured pure electrics priced between 150,000 RMB and 300,000 RMB ($24,320-$48,640), new energy vehicles buyers can find themselves saving 10,000 RMB ($1,621.35) or more after being exempted from purchase taxes. For example, buyers of the 209,800 RMB ($34,016) BYD Qin can save an additional 17,900 RMB ($2,902.21) in purchase tax exemptions on top of the 66,500 RMB ($10,782) they already receive in subsidies.

As early as 2012, the provincial government of Guangxi already experimented with the idea of nullifying the vehicle and vessel tax for new energy vehicles. This followed a decision made by the state government the prior year to raise standards for new energy vehicle subsidies. In that decision, the maximum fuel consumption standard for a vehicle to be eligible for subsidies was changed from 6.9 L per 100 km to 6.3 L. As a result, 80 percent of previously eligible vehicles, including the VW Magotan and Lavida, were no longer eligible for the 3,000 ($486.41) RMB subsidy. Guangxi's 2012 decision to exempt the vehicle and vessel taxes for such vehicles was successful in making new energy vehicles, such as those of the JAC Tongyue, BYD F3, Changan BenBen Mini and Chery QQ3, once again more attractive to consumers.

However major obstacles hindering the growth of new energy vehicle sales in China still exist, such as the lack of proper infrastructure and low public awareness. Despite the increasing amount of attention new energy vehicles are getting, the amount of actual buyers is still low.

Looking around various dealerships in Nanning, Guangxi, the number of dealerships selling new energy vehicles is quite small. The few offerings are reflective of the low amount of attention new energy vehicles get in the city typically. A salesperson from 4S dealership explained more in detail: "Due to the fact that there is not enough charging posts in Nanning, there isn't many people buying new energy vehicles. Our 4S dealership has only sold three or four vehicles; there has only been just over ten vehicle sales in the whole of Nanning." The situation is in stark contrast with a large city like Shenzhen, Guangdong, where it is easy to find charging posts. Furthermore, at Nanning's two charging stations, the number of government-owned new energy vehicles vastly exceeds the number of privately-owned vehicles.

Despite the poor state of current market conditions, many industry analysts are optimistic of the future of new energy vehicles in China. In 2011 the government began experimenting with subsidies for pure electric vehicles in Shanghai, Shenzhen, Hangzhou, Hefei and Changchun. Now with the purchase tax exemptions, new energy vehicles look to become even more attractive to consumers. As long as the proper charging infrastructure can be constructed, potentially with the help of taxes from gasoline stations, it is very possible for interest in new energy vehicles to grow tremendously in the coming years.

"A series of favorable policies will help bring new development opportunities for the [new energy automobile] industry," Yao Hua, dean of the Guangxi Academy of Social Sciences' Industrial Economics Research Institute, stated. Increasing smog and rising fuel prices will help make new energy vehicles more attractive. Mr. Yao believes that when new, more favorable policies are finally implemented, buyers will shift towards buying new energy vehicles. Mr. Yao remarked: "I believe that national and regional authorities will release even more policies to encourage new energy vehicles. New energy vehicles and accessories are the future direction of the automobile industry."