China Extends Electric Vehicle Tax Benefits Again... Li Auto and Nio Stock Prices Rise

Purchase Tax Extension of 50~100% Until 2027

The Chinese government announced an extension of tax reduction measures for the purchase of new energy vehicles, including electric cars, until 2027, leading to a simultaneous rise in the stock prices of Chinese electric vehicle companies.

According to Bloomberg on the 21st (local time), the Chinese government stated that the exemption period for purchase tax on new energy vehicles will be gradually extended until 2027.

According to the "Announcement on the Policy of Purchase Tax Reduction for New Energy Vehicles," jointly issued by the Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology, 100% of the purchase tax on new energy vehicles will be exempted until the end of 2025, and from 2026 to 2027, 50% of the purchase tax will be exempted.

New energy vehicles include fully electric vehicles, hybrid vehicles, and hydrogen vehicles. However, the full exemption amount is capped at 30,000 yuan (approximately 5.4 million KRW), and the 50% exemption amount cannot exceed 15,000 yuan.

China has been exempting purchase tax on new energy vehicles since 2017 to foster the industry. Originally scheduled to end at the end of 2020, the exemption has been extended four times due to the COVID-19 pandemic.

[Image source=Reuters Yonhap News]

Following this news, the stock prices of Chinese electric vehicle companies listed on the Hong Kong Stock Exchange, such as Li Auto (Li Xiang) and XPeng, closed up by over 2%, while NIO's stock price surged more than 5%.

China's new energy vehicle sales reached 6.887 million units last year, a 93.4% increase compared to the previous year. This accounted for 61.2% of global new energy vehicle sales.

Leading Chinese electric vehicle manufacturer BYD sold 1.86 million units last year, surpassing Tesla to become the world's top seller of new energy vehicles. The Chinese automotive industry forecasts that new energy vehicle sales in China will reach 8.5 to 9 million units this year and increase to 12 million units by 2025.