"The policy of exempting new energy vehicles from purchase tax will end." Cui Dongshu: There is a high possibility that a 5% purchase tax will be levied starting next year. Everything will follow the official documents. "It's difficult to continue the tax exemption due to the heavy tax pressure."

Recently, the news that "the policy of exempting new energy vehicles from vehicle purchase tax will end in January 2026" has attracted wide attention.

"It is highly likely that a 5% purchase tax will be levied on new energy vehicles starting next year. As early as 2023, the relevant authorities issued a policy clearly stating that for new energy vehicles purchased between January 1, 2026, and December 31, 2027, the vehicle purchase tax will be halved," said Cui Dongshu, the secretary-general of the Passenger Car Association, in an interview with a reporter from National Business Daily on September 11.

In June 2023, the Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology issued the Announcement on Continuing and Optimizing the Policy of Reducing and Exempting the Vehicle Purchase Tax for New Energy Vehicles (hereinafter referred to as the Announcement), which clearly states that new energy vehicles purchased between January 1, 2024, and December 31, 2025, are exempt from vehicle purchase tax. For each new energy passenger vehicle, the tax exemption amount does not exceed 30,000 yuan. For new energy vehicles purchased between January 1, 2026, and December 31, 2027, the vehicle purchase tax will be halved. For each new energy passenger vehicle, the tax reduction amount does not exceed 15,000 yuan.

Image source: Official website of the Ministry of Finance

In Cui Dongshu's view, the adjustment of the new energy vehicle purchase tax policy is not only an important measure for the government authorities to gradually standardize the competition in the new energy vehicle market but also indicates that China has completed the phased task of gradually developing the new energy vehicle industry into a powerful one. "The end of the policy of exempting new energy vehicles from vehicle purchase tax is an inevitable trend for the policy - makers to conduct normal vehicle management," Cui Dongshu believes.

However, the relevant departments have not made a clear statement on whether the vehicle purchase tax for new energy vehicles will be resumed starting from January 1, 2026.

New Energy Vehicles Have Become the Mainstream, Experts: Continuing Tax Exemption Puts Great Pressure on Tax Revenue

According to the requirements of the Announcement, from 2026 to 2027, individuals and units purchasing new energy vehicles will have to pay the vehicle purchase tax again, but they can still enjoy the tax - reduction preferential policy with a 50% tax cut. Currently, the vehicle purchase tax rate in China is 10%. Based on this calculation, the actual tax rate for new energy vehicles will be maintained at 5%.

Cui Dongshu analyzed that after years of development, China's new energy vehicle industry has reached a relatively mature stage. The sales volume of new energy vehicles is approaching 50% of the total vehicle sales volume, and the monthly market share of new energy passenger vehicles has exceeded 50% for several consecutive months. All these provide a basis for the adjustment of the new energy vehicle purchase tax policy.

The latest data released by the China Association of Automobile Manufacturers shows that from January to August 2025, the cumulative sales volume of new energy vehicles in China reached 9.62 million, a year - on - year increase of 36.7%. The sales volume of new energy vehicles accounted for 45.5% of the total new vehicle sales volume. Among them, the domestic sales volume of new energy vehicles was 8.088 million, a year - on - year increase of 30.1%, accounting for 48% of the total domestic vehicle sales volume. "It is expected that this figure will reach 50% for the whole year of 2025," said Chen Shihua, the deputy secretary - general of the China Association of Automobile Manufacturers.

Image source: China Association of Automobile Manufacturers

The data released by the Passenger Car Association also shows that from January to August 2025, the cumulative retail sales volume of new energy passenger vehicles in China was 7.556 million, a year - on - year increase of 7.5%, and the retail penetration rate reached 51%. As of August this year, the retail penetration rate of new energy passenger vehicles in the domestic passenger vehicle market has exceeded 50% for five consecutive months.

"If the policy of exempting new energy vehicles from purchase tax continues next year, due to the large scale of the new energy vehicle market, the tax pressure will increase," Cui Dongshu believes.

In fact, when the Announcement was released, the relevant person - in - charge of the authorities said that fiscal and tax policies are important policy tools to support the development of the new energy vehicle industry. By continuing and optimizing the policy of reducing and exempting the vehicle purchase tax for new energy vehicles, the development of the new energy vehicle industry can be supported, and automobile consumption can be promoted. A preliminary estimate shows that through the implementation of the extended policy, the total amount of vehicle purchase tax reduction and exemption from 2024 to 2027 will reach 520 billion yuan.

The Policy of Reducing and Exempting the Vehicle Purchase Tax for New Energy Vehicles Has Been Extended Four Times

In fact, the Announcement released in June 2023 is the fourth extension of the policy of reducing and exempting the vehicle purchase tax for new energy vehicles. Since September 1, 2014, when China began to exempt new energy vehicles from vehicle purchase tax, the policy has been extended three times in 2017, 2020, and 2022.

As early as August 2014, the Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology announced that from September 1, 2014, to December 31, 2017, pure - electric vehicles, eligible plug - in (including range - extended) hybrid vehicles, and fuel - cell vehicles that are permitted to be sold (including imported) in China are exempt from vehicle purchase tax.

Supported by this policy, China's new energy vehicle industry experienced explosive growth from 2014 to 2017. In 2015, China's new energy vehicle sales volume exceeded that of the United States for the first time, making China the world's largest new energy vehicle market, and it has maintained its leading position ever since.

Against this background, on December 27, 2017, the relevant authorities announced that from January 1, 2018, to December 31, 2020, new energy vehicles were exempt from vehicle purchase tax. This was the first extension of the policy. During this period, China's new energy vehicle sales volume exceeded one million for three consecutive years.

Image source: Photo by Zhang Jian, reporter from National Business Daily (File photo)

In 2020, affected by factors such as the pandemic, the domestic auto market was under pressure, and the policy of exempting new energy vehicles from vehicle purchase tax was extended for the second time until the end of 2022. According to the data from the Ministry of Industry and Information Technology, from 2020 to 2022, China's annual new energy vehicle sales volume increased from 1.367 million to 6.887 million, a four - fold increase in two years. New energy vehicles accounted for more than a quarter of the total new vehicle sales volume.

In order to further consolidate and expand the development advantages of the new energy vehicle industry, in 2023, the policy of reducing and exempting the vehicle purchase tax for new energy vehicles was extended for another four years until the end of 2027. At that time, the relevant person - in - charge of the Ministry of Finance said that the extension of the policy of reducing and exempting the vehicle purchase tax for new energy vehicles was "stability - oriented", aiming to avoid policy disruptions and sudden changes, maintain support for the development of the new energy vehicle industry, and stabilize market expectations. At the same time, the accuracy and effectiveness of the tax policy were improved. By dynamically raising the technical threshold for enjoying the policy of reducing and exempting the vehicle purchase tax, the incentive effect of taxation can be better exerted to support the high - quality development of new energy vehicles.

It should be noted that currently, the relevant authorities have not officially issued a notice on whether the vehicle purchase tax for new energy vehicles will be resumed starting from January 1, 2026. The final decision shall be subject to the announcement of the relevant authorities. "Don't believe any hearsay. Everything should follow the official documents," Cui Dongshu also emphasized.

This article is from the WeChat public account "National Business Daily". Author: Li Xing. Editors: Duan Lian, Pei Jianru, Yi Qijiang. Proofreader: He Xiaotao. Republished by 36Kr with permission.