China to scrap tax breaks for NEVs and energy-saving vehicles from 2027
Announcement by central government ministries extends the withdrawal of incentives for new-energy vehicles and energy-saving cars
The Ministry of Finance, the State Taxation Administration and the Ministry of Industry and Information Technology said on Friday that they would end the half-rate vehicle-and-vessel tax on qualifying fuel-efficient cars alongside the exemption for battery-electric commercial vehicles, plug-in and range-extender hybrid cars, and fuel-cell commercial vehicles. The measures will take effect on January 1, 2027.
The ministries said the move would “promote tax fairness and strengthen taxation’s role in adjusting income distribution”, noting that the sales price for plug-in and range-extender hybrid passenger cars averaged 218,000 yuan (US$32,110) in 2025, with some models priced at more than 1 million yuan.
The annual vehicle-and-vessel tax typically amounts to a few hundred yuan for most passenger cars. China has offered either reduced or full exemptions for qualifying energy-saving and new-energy vehicles (NEVs) since 2012.
A typical plug-in hybrid owner would pay only 300 to 400 yuan (US$42-56) more a year, an increase which was unlikely to affect purchasing decisions, said Cui Dongshu, secretary general of the China Passenger Car Association.
“In the longer term, automotive tax policy will become increasingly market-oriented, steering industry resources towards pure-electric technology,” Cui said. Battery-electric and fuel-cell passenger cars are unaffected because the tax is based on engine displacement.