Tesla China will likely see its momentum in the domestic EV market accelerate, thanks to the country’s NEV purchase tax exemption being renewed next year. The update was related during a top government meeting.
Reports of the meeting were shared by Chinese state-owned broadcaster China Central Television (CCTV). According to the broadcaster, an executive meeting of the State Council hosted by Premier Li Keqiang revealed that China will continue its policy of exempting new energy vehicles from purchase taxes.
While the meeting did not reportedly point to anything new about NEVs in the Chinese market, cities that currently implement restrictions on vehicle purchases were strongly urged to increase their quotas and relax restrictions on consumers’ ability to buy cars, according to a CNEVPost report.
China’s NEV purchase tax exemption program and the country’s other incentives are among the reasons why China has emerged as the world’s largest electric vehicle market. The NEV purchase tax exemption, which was launched in 2014, allowed most consumers who purchase green vehicles to save about RMB 10,000 (around $1,500). The incentive applied to purchases involving battery electric cars like Teslas, plug-in hybrids, and fuel-cell vehicles.
The policy initially expired at the end of 2017, but it was extended to the end of 2020. In March 2020, however, China opted to extend the NEV purchase tax exemption program to the end of 2022 instead. And as could be seen in the recent government meeting, the program has been extended once more.
The extension of China’s NEV purchase tax exemption program bodes well for EV makers like Tesla. The lion’s share of vehicles sold by Tesla in China is produced in Gigafactory Shanghai. With the NEV purchase tax exemption, the domestically-produced Model 3 and Model Y could compete and perhaps even gain an advantage in the market, especially against comparable combustion-powered rivals like the BMW M3 and BMW X5.
Tesla China is already growing extremely fast, with the company’s local team delivering a record number of vehicles in June. Reports have also emerged suggesting that Gigafactory Shanghai’s output could improve to 3,000 vehicles per day after its recent upgrades to the Model Y and Model 3 line are completed.