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Beijing Retains Tax Credits for Green Vehicle Buyers

Asia / Business and Finance

Contrary to pessimistic forecasts about the possible cancellation by Beijing of tax breaks on environmentally friendly cars, the Ministry of Finance on Friday announced their extension.

Beijing Retains Tax Credits for Green Vehicle Buyers

The changes are expected to take effect on Monday, but buyers of battery and plug-in hybrid vehicles will continue to be exempt from the 10 percent sales tax by the end of 2020.

The automotive sector is one of the key drivers of the Chinese economy and provides one in six jobs. But car sales in the world's largest auto market fell, mainly due to weaker demand amid the current Sino-US trade tensions.

This is partly why, and amid the Chinese government's fight against air pollution, China is now emerging as a world leader in electric vehicles (EV).

Electric vehicle sales in 2018 totaled 1.26 million units, or 52 percent of total global sales, making China the largest market for next-generation vehicles on the planet.

Tax breaks, introduced in early 2018, have made green cars more affordable, and more than 500 startups have been created in the EV sector. However, there are too many players, so analysts believe that with the help of tax policy, the government will be able to regulate the survival of the strongest and most competitive.

Paul Gong, an analyst at UBS, predicted that eight to ten companies would benefit the most from the extension of tax breaks, including Geely Automobile Holdings, Tesla, SAIC Motor, Guangzhou Auto and others. They are launching high performance models in the coming months.

Regardless of tax breaks, the China Automobile Manufacturers Association predicts NEV sales in China will grow 27 percent to a record 1.6 million units in 2019.

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