China has announced it will discount electric vehicles (EVs) and other “new energy” cars from purchase tax, which currently stands at 10% of the net value of the car.
Battery electric vehicles (BEVs) and Plug-in Hybrids (PHEVs) will both qualify to be exempt from the purchase tax. The concession comes in addition to existing, outright government subsidies for EVs, which can be in the region of £3500 to £5500. Similar to the UK plug-in car grants.
All buyers of electric vehicles will be free of paying the levy from September to the end of 2017. This new incentive is one of a number of measures put in place by the Chinese government to push EVs into the mainstream.
Since 2009, when China announced their ambitious roadmap for the integration of EVs, the governments optimism has been somewhat deflated by resistance from the automotive industry and consumers. To date in China, high prices, limited vehicle ranges and a lack of charging infrastructure have all led to a reluctant public attitude towards EVs.
While the Chinese government has set an ambitious target of having 5 million new energy vehicles (including hybrids, fuel cell vehicles, PHEVs and BEVs) on the roads by 2020, according to the China Daily, only 70,000 are presently in use.
One of the main motivations to switch to electrically powered transport in China is to reduce carbon dioxide emissions and improve air pollution, the latter issue being of particular concern in the many conurbations across the country. It would also help diminish a dependency on fossil fuels, allowing them to conserve domestic resources as well as lowering the country’s vulnerability to oil price fluctuations. What’s more, it is an opportunity to get ahead of global competitors in an emerging market.
Importantly, the new purchase tax discount stretches to foreign imports, which will surely play a large part in accelerating the EV market. Real progress, though, will be centered on partnerships enabling the manufacturing of EVs on home soil – in Chinese law, foreign car companies are required to form a partnership (limited to 50% foreign ownership) with a Chinese company to be able to manufacture vehicles in China.
This policy has seen joint ventures such as Nissan and Dongfeng, and General Motors and SAIC Motors. These partnerships have notably had a significant focus on electric vehicle research and development in the last few years, with the State heavily committed to an EV future.
Interestingly, Tesla Motors are still contemplating which Chinese company to partner with; a decision likely to be made by the end of 2014. Tesla’s leading technology and ambition, supplemented by these new government incentives could be the catalyst China has been seeking to spark an electric revolution.
The Guardian, McKinsey