China expected to extend electric vehicle tax rebate

China is planning to extend a tax rebate on the purchase of new-energy vehicles after the incentive helped the country become the world’s biggest market for clean fuel automobiles, according to people with direct knowledge of the matter.

China’s government will continue to exempt the 10 per cent purchase tax on new-energy vehicles at least through 2020, the people said. The current tax rebate policy is due to expire at end of this year.

Shares of electric-vehicle makers jumped as extending the tax rebate will give a fillip to China’s development of the NEV industry, a term used to refer to electric vehicles, plug-in hybrids and fuel-cell cars.

The surge in demand for such vehicles in China has attracted billions of dollars of investments from companies such as Volkswagen and Ford Motor Co while Tesla is considering setting up a factory in the country. The Chinese government has recently announced a series of measures regarding manufacturing licenses and joint ventures that would allow foreign companies to set up solely owned assemblies.

Sales of NEVs surged 53 per cent to 500,700 units last year and boosted the overall ownership of such vehicles in the country to over a million units. That is more than triple the tally in 2015, according to the China Association of Automobile Manufacturers.