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China’s electric vehicle (EV) market is witnessing a surge in year-end sales as consumers rush to take advantage of full tax exemptions before they are reduced in 2026. The policy change, confirmed by state media, will cut purchase tax benefits for new energy vehicles (NEVs) by half starting January 1, 2026.
According to Sina Finance, dealerships across China are reporting record order volumes, with some showrooms seeing sales increase by nearly 60% compared with typical monthly levels. The rush comes as the full purchase tax exemption, which currently saves buyers up to 30,000 yuan (US$4,200) per vehicle, is set to expire on December 31, 2025.
From next year, NEV buyers will receive a 50% tax exemption, capped at 15,000 yuan (US$2,100) — a policy valid through 2027, according to China Central Television (CCTV).
Policy goals and market impact
Industry experts say the adjustment signals a shift in Beijing’s strategy from subsidy-driven expansion to quality and value-led growth. The China Automobile Dealers Association described the move as “a fiscal and industrial recalibration,” intended to curb “price wars” among automakers and promote sustainable market competition.
In October 2025, the Ministry of Industry and Information Technology, the Ministry of Finance, and the State Administration of Taxation jointly announced tighter qualification standards for vehicles eligible for the exemption.
For instance, plug-in hybrid and range-extended cars must now achieve a minimum pure-electric range of 100 km, a requirement designed to filter out lower-performance models from benefiting.
Automaker response
To cushion the blow, several manufacturers have launched “tax-difference guarantee” programs, pledging to cover any lost benefits for customers who place orders before November 30, 2025, but receive their vehicles after the new policy takes effect in 2026.
Industry analysts predict a two-phase effect: a sharp sales surge in late 2025 as consumers rush to buy, followed by a slowdown in early 2026 once the reduced incentives come into force.
A turning point for China’s EV market
Since 2014, China’s generous purchase-tax exemptions have been a cornerstone of its EV boom, helping the country become the world’s largest electric vehicle market. EVs now account for over 45% of all new car sales nationwide.
Experts believe the 2026 policy marks the start of a new phase focused on technological innovation, brand differentiation, and reduced reliance on government support.
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