China announces steps to stimulate auto demand and may prolong EV tax break

On Thursday, China unveiled a slew of new measures designed to increase automobile sales, including the possibility of extending a tax cut for electric vehicles and the detailing of plans to increase the number of charging stations and promote reduced charging fees.

The plan was presented by the Ministry of Commerce in collaboration with 16 other departments. Following the announcement of the plan, shares of Chinese automakers surged, with Geely up 6% and Great Wall Motor up 4%.

As part of the new efforts, authorities last month halved the auto purchase tax to 5% for cars priced under 300,000 yuan ($45,000) with 2.0-litre or smaller engines.

The ministry also said it would encourage the replacement of older vehicles, increase credit support for car purchases and remove barriers to selling second-hand cars across different provinces.

In recent months, the world’s biggest automobile industry has been severely impacted by rigorous lockdowns imposed in Shanghai and other regions of China to prevent the spread of the Omicron coronavirus type.

At Thursday’s briefing, Vice Minister of Commerce Sheng Qiuping said that consumption on automobile sector is expected to continue to rebound and achieve rapid growth in the second half of the year.

EV sales soared 130% to 546,000 units last month, accounting for nearly 30% of total vehicle sales. Sales for market leader BYD more than tripled to 134,000.