China gradually phasing out EV benefits

Tengrinews.kz – A tax benefit that supported China’s electric vehicle battery industry for more than 10 years has ended, citing CarNewsChina.

From September 1, 2026, lithium and lithium-ion rechargeable batteries became subject to a 2 percent consumption tax. From September 1, 2027, the rate will rise to 4 percent. Previously, batteries used in electric vehicles enjoyed preferential tax treatment.

The changes are part of a gradual reduction in state support for new energy vehicles. Since 2026, China has also abolished the full exemption from purchase tax for such vehicles. Instead, a 50 percent discount applies, but no more than 15,000 yuan per vehicle.

From January 1, 2027, a number of other benefits for electric vehicles, plug-in hybrids, extended-range vehicles and some commercial models are expected to be canceled.

At the same time, tax benefits for sodium-ion and solid-state batteries will remain in place at least until the end of 2028. The gradual phaseout of benefits is expected to increase costs for both manufacturers and buyers of electric vehicles.

As a reminder, China has seen a decline in fuel tax revenues used for road repairs due to the growing popularity of electric vehicles.

Chinese authorities have found themselves in a situation where electric vehicle drivers do not pay fuel tax, but at the same time accelerate road wear because electric vehicles are heavier than conventional cars.

New ways of financing road infrastructure are currently being considered. One option involves introducing road-use fees based on distance traveled.

At the same time, China is gradually reducing benefits for electric vehicle owners. The sales tax discount has already been reduced to five percent, while the maximum benefit amount has been capped at 15,000 yuan.

In addition, annual tax breaks for plug-in hybrids and extended-range electric vehicles are planned to be abolished.