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China's Ministry of Finance announced on 28 June that buyers of new energy vehicles (NEVs) will continue to enjoy the new vehicle purchase tax break until the end of 2020.
Significance: The extended tax break on NEVs is part of China's incentive package to increase their appeal to consumers. Electric vehicles (EVs) and plug-in hybrids have been exempt from the 10% purchase tax since 2014. For 2019 and 2020, it will still play a positive role in encouraging consumers to opt for a NEV. The preferential tax policy, along with government-backed subsidies, effectively drives down the purchase price. Such policies will eventually be scrapped by policy makers in order to reduce manufacturers' reliance on financial support.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.