China's Automakers Roll Out Tax-Offset Subsidies as NEV Purchase Incentives Set to Narrow

TMTPOST -- Chinese automakers are racing to stimulate year-end demand for new energy vehicles as the country prepares to scale back a decade-long purchase tax exemption.

More than 10 manufacturers—including Xiaomi, Li Auto, Nio, and Geely-backed Zeekr and Lynk & Co.—are offering subsidies to offset next year’s levy for customers who place orders now, seeking to lock in sales before the new rules take effect.

Legacy brands such as Chery Automobile, Changan Automobile, and GAC Group have joined the push, along with joint ventures of Audi and Buick, accelerating a broad industrywide campaign to front-load purchases before the end of 2024.

China has waived the 10% purchase tax on NEVs since 2014, a policy that helped turn the country into the world’s largest EV market. Beginning Jan. 1, the incentive will be partially rolled back: buyers will face a 5% tax, capped at 15,000 yuan (USD2,114) per vehicle.

Carmakers fear that long delivery cycles and year-end backlogs could leave some customers paying the tax if cars arrive late, prompting them to directly cover the cost to preserve the value proposition.

The policy shift is already influencing consumer behavior. Buyers are showing a stronger willingness to finalize purchases before year-end, said Cui Dongshu, secretary-general of the China Passenger Car Association.

Automakers are responding in kind, using the timing to bring forward demand and strengthen monthly sales figures. Still, Cui said the subsidies are expected to remain a short-term measure, likely expiring with the close of the year.

China’s NEV market continues to outperform expectations. Sales climbed 20% in October from a year earlier to 1.72 million units, according to data from the China Association of Automobile Manufacturers. NEVs accounted for nearly 52% of total vehicle sales, marking the first time the category has surpassed the 50% threshold.

Manufacturers have intensified model launches, production scheduling and delivery planning since October to capture as much demand as possible ahead of the tax adjustment, said Chen Shihua, deputy secretary-general of CAAM, during the group’s monthly press briefing. He added that improvements in industry self-regulation—part of Beijing’s push to reduce price wars and stabilize market behavior—have helped maintain steady momentum in the broader auto sector.

The rush to secure orders highlights the industry’s sensitivity to policy signals as automakers grapple with intense competition, tightening margins and a crowded field of domestic and foreign brands.

While the reduced tax break will narrow financial incentives for consumers next year, analysts say China’s deep bench of EV models, falling battery costs and expanding charging infrastructure will continue to support long-term market growth.

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