- From January 2023, China terminated its long-lasting purchase credits for New Energy Vehicles (NEVs). However, the government recently decided to sustain its support by extending the exemption of the Vehicle Purchase Tax (VPT, 10 percent of net retail price) to 2027.
- Germany is also phasing out its purchase credits. The maximum credit for private-use passenger vehicles has been reduced from 6k Euro per unit in 2022 to 4,5k in 2023, and will further decrease to 3k starting in 2024. However, the subsidy still accounts for a significant portion of the price.
- The EV tax credit in the US was introduced in 2009, with the maximum credit at 7,500 US dollars (6,800 Euro). The credit ceiling has not been altered since. However, conditions to qualify for the maximum credit have been revised to achieve new policy motives.
- The latest regulation in 2023 requires vehicles to be assembled in North America. For power batteries used in EVs, over 50 percent of components need to be manufactured in North America, and over 40 percent of critical raw materials need to be mined and processed in countries with free trade agreements with the US.
- China used to have similar requirements for subsidy qualifications: EVs had to use power batteries from domestic „whitelist“ players until the list was abolished in 2019. Purchasers of imported vehicles enjoyed Vehicle Purchase Tax exemptions but did not enjoy purchase grants.
- In comparison, the EV subsidy scheme in Germany does not include any local content requirements yet. However, Europe may also consider encouraging local production or local content via a revised subsidy scheme, as proposed by France recently.
- As countries increasingly rely on industrial policies to pursue regional interests in a global context, companies need to anticipate potential policy shifts, not only in China but also in other economies.
Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.