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China likely to extend 10% EV tax rebate, reports say

BYD Co. factory in China

The 10% purchase rebate, due to expire at the end of the year, looks set to be extended until 2020 according to government sources

China will extend a 10% tax rebate on the purchase of electric and plug-in hybrid electric vehicles (PHEVs) until at least 2020, Bloomberg has reported.

The news agency spoke with sources with knowledge of the plan.

The current “new energy” vehicle tax rebate –which also covers fuel cell vehicles (FCEVs) – is due to expire at the end of 2017, and has been one of the key policies which has helped China become the world’s largest market for EVs.

“China wants the number of new energy vehicles to grow, and I’m sure they’ll take many additional steps if they’re not meeting their targets,” Yunshi Wang, director of the China Centre for Energy and Transportation at the University of California, Davis, told Bloomberg.

Sales of so-called new-energy vehicles in China have tripled in number since as recently as 2015, to more than a million models sold, according to the China Association of Automobile Manufacturers.

However, the state’s willingness to offer incentives and rebates also led to dramatic overcapacity and fraud in the manufacturing sector over recent years. While consumer rebates look likely to be kept intact, various government bodies are now reviewing subsidy provisions, which may be cut by up to 20% next year.

As a replacement, starting from 2019 the government will impose a quota system whereby ICE vehicle manufacturers must buy credits from EV manufacturers, in a scheme that mirrors that used by the US.

Automakers in China must then ensure that 10% of their production is comprised of EVs by 2019, rising to 12% in 2020. The rule will apply to any manufacturer making or importing more than 30,000 ICE vehicles per year.

In the meantime, Western automakers are piling in to launch joint ventures with Chinese firms, in order to corner a piece of the market. Ford, Renault-Nissan, Volvo and GM have all announced plans in recent months to meet growing demand.

Even in the face of very ambitious government production targets, the extension of a consumer rebate will be welcome news to those firms lining up for an even greater push next year.

 

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