China's latest package of favorable moves for new energy vehicles, including exempting NEV purchase taxes for another year, is expected to further ensure the sector's smooth and healthy development, analysts said.
The tax-exemption policy, which was scheduled to expire by the end of this year, has been extended by one year to 2023, said the State Council－the nation's Cabinet－on Friday.
The policy was initiated in 2014 to foster NEV sales, and this is the third time it has been extended.
The tax stands at 10 percent of a vehicle's sticker price, and it is estimated that its continued suspension will create tax cuts worth 100 billion yuan ($14.6 billion), said Kaiyuan Securities.
Local governments will also be required to issue extra license plates for NEVs, and such vehicles will continue to be exempt from ban-days in big cities, the State Council said.
Deng Jianquan, a Kaiyuan analyst, said the moves will serve as a buffer to prevent fluctuations in the NEV market in 2023, which might otherwise experience turbulence as the government's subsidies will be completely withdrawn by the end of this year.
China started to subsidize its NEV sector in 2009. Thanks in part to financial stimulus, the country became the largest market for NEVs in 2015 and has since held that title for seven years in a row.
A growing number of models and improved charging infrastructure have made NEVs a serious choice for car buyers and a highlight of China's auto market.
Cui Dongshu, secretary-general of the China Passenger Car Association, estimates that NEV sales will hit 6.5 million units this year, up from 3.5 million in 2021.
He said that the State Council's latest package of moves will ensure the sector continues its upward momentum.