China to Exempt Electric Cars From 10% Purchase Tax – Bloomberg

Posted: Thursday, July 10, 2014

China will waive a 10 percent
purchase tax on electric cars as part of expanded measures to
combat pollution and cut energy dependence.

New-energy autos — China’s term for electric cars, plug-in
hybrids and fuel-cell vehicles — will be excluded from the levy
from Sept. 1 to the end of 2017, according to a statement posted
on the central government’s website yesterday, citing a State
Council meeting led by Premier Li Keqiang. Electric carmaker BYD
Co. (1211)
climbed as much as 4.5 percent in Hong Kong trading.

The tax break is China’s latest attempt to spur demand for
electric vehicles, whose sales have lagged behind a government
target, as state subsidies failed to overcome consumer concerns
over price, convenience and reliability. China has identified
EVs as a strategic industry that can help it gain global
leadership, reduce energy dependence and cut emissions that have
contributed to worsening air pollution.

“The exemption will help spur demand for electric cars and
plug-in hybrids by lowering the purchase cost,” said Han Weiqi,
a Shanghai-based analyst at CSC International Holdings Ltd.
“Still, it remains to be seen whether the latest measure will
have a decisive impact given other types of funding have been in
place.”

Tesla, BMW

The tax break also applies to qualified imported EVs,
according to the government statement, paving the way for
foreign carmakers such as Tesla Motors Inc. (TSLA), Bayerische Motoren
Werke AG and Volkswagen AG (VOW) to benefit from the waiver.

Tesla began deliveries of its imported Model S sedans in
China this year. BMW will start sales of its i8 plug-in hybrid
and i3 electric car in September, while VW plans to offer its
up! electric car in China by the end of this year.

Supporting a strategic and emerging industry like new-energy vehicles is a “win-win” for industrial development and
environmental protection, the central government said in the
statement. Developing new-energy autos is important for spurring
innovation, promoting energy savings and reductions in
emissions, and will help to drive domestic demand and nurture
new avenues of growth, the notice said.

The central and local governments have funded purchases of
new-energy vehicles since 2010, offering subsidies reaching as
much as 114,000 yuan ($18,400) off the price of an EV in
Beijing. Even so, fewer than 70,000 of these autos are on
China’s roads five years after the program began, trailing the
government target for 500,000 vehicles by next year, according
to comments from Vice Premier Ma Kai posted on Chinaev.org
website in April.

Preferential Policies

“The State Council is putting electric vehicles high on
its agenda because they not only save energy but also avoid
atmospheric pollution,” Wan Gang, China’s Science and
Technology Minister, said today in Beijing. “Senior officials
from the State Council are working on that and I believe very
soon there will be more preferential policies for electric
vehicles coming out.”

More government support is needed to develop the
infrastructure required to promote EV usage, such as building
more charging stations that are conveniently located, he said.

The Chinese state-run research center in charge of helping
the government draft automotive policy said last month that it
recommended that electric-vehicle manufacturing be opened to
companies other than carmakers.

The China Automotive Technology and Research Center has
drafted the policy changes and proposed the issuance of two to
three special licenses for EV manufacturing, Wang Cheng, who
oversees the project at the center, said in an interview in
June. The recommendations will be circulated among industry
regulators for discussion before submission to the State
Council, with approval expected as soon as this year, he said.

To contact Bloomberg News staff for this story:
Tian Ying in Beijing at
ytian@bloomberg.net;
Alexandra Ho in Shanghai at
aho113@bloomberg.net

To contact the editors responsible for this story:
Young-Sam Cho at
ycho2@bloomberg.net
Chua Kong Ho

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