CHINA PLANS EV INCENTIVE EXTENSION
Surge in demand has attracted huge foreign investments
CHINA is planning to extend a tax rebate on the purchase of new-energy vehicles after the incentive helped the country become the world’s biggest market for clean fuel vehicles, according to people with direct knowledge of the matter.
China’s government would continue to exempt the 10 per cent purchase tax on new-energy vehicles at least through 2020, said the people. The current tax rebate policy is due to expire at end of this month.
Shares of electric-vehicle (EV) makers jumped as extending the tax rebate will give a fillip to China’s development of the new-energy vehicles industry, a term used to refer to electric vehicles, plug-in hybrids and fuel-cell cars.
The surge in demand for such vehicles in China has attracted billions of dollars of investments from companies such as Volkswagen AG and Ford Motor Co while Tesla Inc is considering setting up a factory.
The government has recently announced a series of measures for manufacturing licences and joint ventures that would allow foreign companies to set up solely-owned assemblies.
Sales of new-energy vehicles surged 53 per cent to 500,700 units last year and boosted the overall ownership of such vehicles in China to more than a million units. That was more than triple the tally in 2015, according to the China Association of Automobile Manufacturers.
“China wants the number of new-energy vehicles to grow, and I’m sure they’ll take many additional steps if they’re not meeting their targets,” said Yunshi Wang, director of the China Centre for Energy and Transportation at the University of California.
Eliminating the tax incentives abruptly would mostly hurt older manufacturers whose technology and manufacturing efficiency can’t match new entrants in China’s car market, he said.
While the government wants to encourage consumers to buy more EVs, the authorities are concerned about overall subsidies.
Different arms of the government had been working on plans to scale back overall subsidies on purchase of new-energy vehicles next year and a consensus had not yet been reached, according to a source. Bloomberg