In its latest bid to encourage greener mobility, the Chinese government has extended its tax exemptions for new energy vehicle (NEV) purchases until 2020. The tax breaks introduced to reduce emissions began in 2014 and were supposed to end by December 31, 2017.

"The tax incentive covers fully electric, hybrid and fuel-cell vehicles that have obtained sales permission in China, and the measure will be effective through the end of 2020," said the Ministry of Finance.

More NEV models are expected to be added to the list of cars eligible for tax exemption, as long as they meet a set of technical, quality, safety and efficiency standards.

The move was made to "increase support for innovation and development in new energy vehicles," according to the government agency.

NEV buyers will enjoy the renewed 10% tax break as conventional combustion engine car buyers will be slapped a 10% sales tax for cars with 1.6-liter or smaller engines by January 1, 2018.

The timely extension also comes as automakers brace for new NEV quota regulations which forces them to introduce new energy vehicles or face government penalties. The quotas will come into play by 2019.

The Chinese NEV market has realized tremendous growth in the recent years driven by favorable policies, subsidies and tax incentives. A total of 609,000 NEVs were sold in the first 11 months of 2017, and the China Association of Automobile Manufacturers are hoping to breach the 700,000 unit barrier by yearend.

China extends tax exemption on hybrid and electric vehicles

Increased number of charging stations 

China has also realized a significant increase in charging stations which are key to increasing acceptance of electric vehicles. As of October, there are 195,000 public charging stations all over the country built by the government, an 82% increase from the same month last year.

The number of privately owned charging stations meanwhile has surged 214% to 188,000 revealed Guo Wei, an official from the National Energy Administration, at a recent forum in Beijing.

The Chinese government is eyeing an additional 12,000 stations to serve an estimated 5,000,000 NEVs by 2020.

Despite having nearly 400,000 chargers in place, there are major issues such as the problem of interoperability, as there is currently no unified charging standard set in place. The average utilization rate of public chargers is currently at a very low 15%.

Government takes the lead

In a move to further encourage the use of NEVs, a new regulation on official vehicle use was issued earlier this month. It mandates the Communist Party of China and government agencies to take the lead in using new energy vehicles.

China extends tax exemption on hybrid and electric vehicles

New green plates

Localities have also started issuing special license plates for NEVs. These plates will be available in two types: a small new energy vehicles special plate background with a gradient of green, large new energy vehicles with a plate number of yellow and green double color, and the common car plate phase. The new alphanumeric combinations will feature six numeric digits instead of five, in anticipation to increased adoption of NEVs in the coming years.