The tax difference is 15%. Is it time to abandon the discrimination against fuel-powered vehicles and cancel the "privileges" of new energy vehicles?
Currently, fuel-powered vehicles contribute the vast majority of the tax revenue in the automotive industry. In 2023, the tax revenue related to fuel-powered vehicles reached trillions of yuan, while new energy vehicles still rely on tax and fee incentives for development. With the intensifying "involution" in the industry, the issue of unfair taxation between fuel-powered vehicles and new energy vehicles has become increasingly prominent.
Against the backdrop of the rising market share of new energy vehicles, the tax and fee differences between fuel-powered vehicles and new energy vehicles, as well as the issue of fair competition based on these differences, have attracted industry attention.
On June 11th, Cui Dongshu, the secretary-general of the Passenger Car Market Information Joint Conference of the China Automobile Dealers Association, said in a live interview that "I will only buy fuel-powered vehicles and will never buy new energy vehicles." One of the reasons he gave was that the price system and tax system of new energy vehicles are completely different from those of traditional fuel-powered vehicles. Fuel-powered vehicles are managed as luxury goods and face huge tax pressure, while new energy vehicles, as tax-free products, have extremely low costs, making it difficult for the two to compete fairly. "Fuel-powered vehicles shoulder the social responsibility of the entire automotive market. They pay huge taxes but bear a bad reputation," Cui Dongshu said.
After that, Cui Dongshu issued another article emphasizing that his action was not a sign of non - support for new energy. Instead, it was a personal choice based on his actual situation, such as low annual vehicle mileage and the current inconvenience in his place of residence. He stressed that the development of new energy vehicles is China's established strategy, and he firmly supports and actively promotes it.
Coincidentally, Li Fenggang, the executive deputy general manager of FAW Audi Sales Co., Ltd., pointed out in an interview with the media at the 2025 Guangdong - Hong Kong - Macao Greater Bay Area Auto Show held not long ago that the tax and fee cost of a fuel-powered vehicle is currently about 15% higher than that of a new energy vehicle. He called on the industry to achieve "equal rights for fuel and electric vehicles" as soon as possible under the continuous "involution" situation in the automotive industry, so that automobile enterprises can compete on a fair starting line.
In the past decade, China's new energy vehicle industry has achieved rapid growth, and continuous fiscal subsidies and tax reduction policies have played a key role. According to incomplete statistics, from 2009 to 2019, the subsidy for new energy vehicles in China exceeded 100 billion yuan. Currently, the national subsidy has been phased out, but some local government subsidies are still in place. In addition, data from the State Taxation Administration shows that from September 2014 to June 2023, China exempted new energy vehicles from vehicle purchase tax of more than 260 billion yuan.
Currently, fuel-powered vehicles contribute the vast majority of the tax revenue in the automotive industry. In 2023, the tax revenue related to fuel-powered vehicles reached trillions of yuan, while new energy vehicles still rely on tax and fee incentives for development. With the intensifying "involution" in the industry, the issue of unfair taxation between fuel-powered vehicles and new energy vehicles has become increasingly prominent.
Significant Tax and Fee Differences between Fuel and Electric Vehicles
Li Fenggang's statement that "the tax and fees of fuel-powered vehicles are 15% higher than those of new energy vehicles" has some basis. According to the current tax policy, taking a vehicle worth 300,000 yuan as an example, a fuel-powered vehicle needs to pay purchase tax and consumption tax during the purchase stage. Among them, the purchase tax is levied at 10% (calculation formula: vehicle price ÷ 1.13 × 10%), which is 26,500 yuan. The consumption tax, calculated based on the popular 2.0T displacement in the market, has a tax rate of 5%, that is, 15,000 yuan. In addition, during the use stage, fuel-powered vehicles need to pay vehicle and vessel tax annually. Calculated based on a 2.0T vehicle, it is about 4,200 yuan. According to this calculation, when only calculating the vehicle and vessel tax for one year, the total tax and fees that a 300,000 - yuan fuel-powered vehicle needs to pay is 45,700 yuan, accounting for 15.2% of the vehicle price of 300,000 yuan. New energy vehicles do not need to bear these three types of taxes and fees.
The tax and fee cost differences between fuel-powered vehicles and new energy vehicles are also reflected in other aspects. For example, about 48% of the gasoline price of fuel-powered vehicles is tax, including refined oil consumption tax (29.04%), value - added tax (11.5%), and other surcharges (about 4.56%). Electric vehicles only pay the electricity bill when charging (the residential electricity price is about 0.5 yuan per kilowatt - hour) and have no additional tax burden. Calculated based on an annual driving distance of 15,000 kilometers and a fuel consumption of 8 liters per 100 kilometers, the fuel tax for 5 years is about 48,000 yuan, while electric vehicles do not need to pay this tax.
In addition, fuel-powered vehicles also have some hidden costs, including license plate fees and traffic restriction policies. For example, the auction price of fuel-powered vehicle license plates in Shanghai is about 80,000 - 100,000 yuan, and the bid price in Beijing exceeds 100,000 yuan. New energy green license plates are issued for free (but you need to queue up). In terms of road rights, fuel-powered vehicles in many cities are restricted from driving one day a week, while new energy vehicles are not restricted. In addition, electric vehicles in some cities enjoy policies such as free parking. If the hidden costs are taken into account, the actual tax and fee expenditure of fuel-powered vehicles is much higher than that of new energy vehicles.
For new energy vehicle owners, the tax and fee incentives for new energy vehicles are a great benefit. However, for fuel-powered vehicle enterprises and owners, it is the development of fuel-powered vehicles that supports the incentives for new energy vehicles. Taking the road maintenance fee as an example, since the state abolished the road maintenance fee and implemented the fuel tax in 2009, integrating the road maintenance fee into the oil price, pure electric vehicles do not need to refuel, thus avoiding the road maintenance fee included in the oil price, but they also use the roads. As the number of new energy vehicles continues to increase, the fuel tax revenue continues to decrease, and the gap in highway maintenance funds gradually widens, which may ultimately affect public expenditures such as road maintenance and lead to a tight budget.
"Privileges" Intensify Involution
Boosted by subsidies and tax and fee incentives, new energy vehicles have achieved rapid development. By 2024, their market penetration rate has exceeded 50% and continues to rise.
However, new energy vehicles with subsidy and tax advantages are also accused of being the main force in the "involution" of the automotive market. They have greater price advantages and price - cut spaces compared with fuel-powered vehicles. In fact, in several rounds of price wars in the automotive market in recent years, new energy vehicle enterprises such as BYD and Tesla have been more active. In this situation, fuel-powered vehicles are forced to cut prices, resulting in a continuous decline in the industry's profit margin.
According to data from the National Bureau of Statistics, in 2024, the operating income of the automotive manufacturing industry increased by 4.1% year - on - year, the operating cost increased by 5.1%, and the total profit decreased by 8%. In the first quarter of 2025, the profit margin of the automotive manufacturing industry was only 3.9%. "If the profit margin falls below 4%, automobile enterprises will cut safety investment. If all enterprises in the automotive industry cannot make healthy profits, it will ultimately affect the product quality and pose potential safety hazards to public travel," Li Fenggang believes.
Recently, there have been more voices in the industry calling for the cancellation of the "privileges" of new energy vehicles and the realization of "equal rights for fuel and electric vehicles". Wei Jianjun, the chairman of Great Wall Motors, said in a recent interview with the media that the development of the industry under the subsidy for new energy vehicles is not healthy. He said that the subsidy should be phased out because "it is not healthy and cannot achieve true commercialization". Zeng Qinghong of GAC Group also previously suggested that when the penetration rate of new energy vehicles reaches 50%, relevant departments can study the issue of "equal rights for fuel and electric vehicles".
Cui Dongshu proposed in March this year that discriminatory policies against fuel-powered vehicles should be reduced. Specific measures include: achieving tax fairness between new energy vehicles and fuel-powered vehicles; canceling unreasonable traffic restrictions and purchase restrictions on fuel-powered vehicles; formulating unified environmental protection standards and treating fuel-powered vehicles and new energy vehicles equally; increasing incentives for fuel-powered vehicle technology; and improving the market mechanism to ensure fair competition between fuel-powered vehicles and new energy vehicles in the market.
However, Zhou Lingkun, the president of Deloitte China's Enterprise Technology and Performance Business Group, believes that although the policy tilt towards new energy vehicles has indeed squeezed the living space of fuel-powered vehicles to a certain extent and forced fuel-powered vehicle enterprises to be actively or passively involved in the price war, the formation of the "involution" situation is a complex systematic problem. Tax is not the only reason. Overcapacity, homogeneous competition, changes in the macro - economic environment, and changes in consumer demand are all important driving factors.
Huang Tianwei, the deputy dean of the Institute of Management Science and Engineering at Wuhan University of Science and Technology, told Economic Observer that we cannot simply deny the support policies for new energy vehicles. Without these policies, the new energy industry may not be able to quickly overcome the high - cost stage in the initial development period, and it would be even more difficult to form the current competitiveness. However, recently, some leading new energy vehicle enterprises have launched a new round of price cuts, which has raised concerns about their technological innovation and quality assurance. In this situation, we need to prevent enterprises from relying too much on subsidies for survival and forming a vicious "involution" of low - price and low - quality new energy vehicles.
Debate on the Timing of "Equal Rights for Fuel and Electric Vehicles"
Regarding when and how to implement "equal rights for fuel and electric vehicles", different experts in the industry have different views.
Huang Tianwei said that "equal rights for fuel and electric vehicles" is determined by the cyclical characteristics of the automotive industry's development and the essence of the market economy. With the development of new energy vehicles, the market positions of fuel-powered vehicles and new energy vehicles are gradually becoming equal. Continuing to give special policies to new energy vehicles violates the market principle of competitive neutrality. Secondly, the profit - making effect of leading new energy vehicle enterprises has begun to appear. With the increase in sales volume, long - term industry subsidies have also led to a continuous decrease in fiscal revenue, which does not conform to the essential attributes of the market economy.
However, he also believes that the timing for "equal rights for fuel and electric vehicles" is not yet mature, mainly due to two obstacles. From the consumer side, the price advantage of new energy vehicles is very attractive to price - sensitive groups, which is an important driving force for the current rapid market growth. Moreover, the environmental protection characteristics of the new energy vehicle industry and the social benefits it brings need to be further promoted. Immediately canceling subsidies and privileges for electric vehicles will face the risk of a decline in market share. In addition, the development of electric vehicles still faces some difficulties, such as the imperfect charging infrastructure in some areas and the relatively high maintenance cost. Canceling the incentives may affect consumers' choices.
At the operational level of new energy vehicle enterprises, most new energy vehicle enterprises are still in the investment stage and face huge losses. In 2024, except for a few new energy vehicle enterprises such as BYD and Li Auto that achieved profitability, many enterprises were still deeply in the red. Data shows that NIO's annual net loss widened by 8.1% year - on - year to 22.4 billion yuan; Xiaomi Auto lost 6.2 billion yuan throughout the year, and XPeng Motors lost 5.8 billion yuan. After the cancellation of policy tilt, these enterprises will face greater pressure.
From an international market perspective, countries such as Europe and the United States have set up barriers to the export of Chinese new energy vehicles. If the domestic market cancels subsidies too early, it will inevitably weaken the global competitiveness of Chinese new energy vehicles. Moreover, the strategic goal of technological innovation in China's new energy vehicle industry has not been fully achieved. There are still shortcomings in China's new energy vehicles in terms of core technologies (such as chips and high - end materials) and supply chain security, and policy support is needed to participate in global competition.
Cui Dongshu holds the opposite view. He believes that even if the policy privileges for new energy vehicles are cancelled now, new energy vehicles are expected to continue to develop rapidly. After years of development, the new energy industry has gradually become stronger, and the advantage of low - cost use of new energy vehicles is obvious. In addition, the overall intelligence level of new energy vehicles is one level higher than that of fuel-powered vehicles, and many consumers may be willing to pay for the fresh experience. He pointed out that 80% of the global automotive market consists of fuel-powered vehicles. To open up the international market, we must rely on fuel-powered vehicles. Enterprises should be confident in achieving "equal strength for fuel and electric vehicles" at the production end and launch better fuel-powered vehicle products.
Zhou Lingkun said that as he understands, new energy vehicle enterprises have anticipated the adjustment of the purchase tax policy. In the future, they cannot rely on policy support indefinitely. Instead, they should rely on multiple measures such as cost reduction through technology, economies of scale, flexible product strategies, and promotional combinations to deal with the risks and challenges in the absence of policies.
So, how can the policy be balanced to take into account the development of both fuel-powered vehicles and new energy vehicles? During the Two Sessions this year, Zhu Huarong, the chairman of Changan Automobile, suggested that new energy vehicles should be taxed according to their weight, battery capacity, and carbon emission level. Huang Tianwei suggested that "equal rights for fuel and electric vehicles" can be promoted in stages and through multiple measures. In 3 - 5 years, "equal rights for fuel and electric vehicles" should be fully realized to promote equal treatment of fuel-powered vehicles and new energy vehicles in terms of market access, tax policies, and vehicle - using environment. At the same time, in the future, key support can be provided for core technology R & D (such as solid - state batteries and fast - charging technology) and infrastructure construction (such as charging piles and battery - swapping stations), and the focus can be shifted from direct subsidies to market - based incentive measures such as carbon pricing and infrastructure investment.
In fact, the current policy has begun to reduce subsidies and tax incentives for new energy vehicles. According to the new policy, starting from 2026, the exemption limit for new energy vehicle purchase tax will be reduced to a maximum of 15,000 yuan (currently, the maximum is 30,000 yuan), and it may be completely cancelled in 2028. "The current policy direction is to gradually phase out the incentives and avoid a cliff - like impact. For example, the purchase tax exemption policy has a 4 - year transition period from half - exemption to full - collection. In essence, it is to force new energy vehicle enterprises to build real market competitiveness through a 'soft landing' of policies," Zhou Lingkun said.
This article is from the WeChat public account "Economic Observer". Author: Zhou Ju. Republished by 36Kr with permission.