Here is Rystad Energy’s weekly battery materials and EV market note from analyst Abhishek Murali

China extends purchase tax exemption tax on NEVs (Battery Electric, Plug-In Hybrid and Fuel Cell); puts focus on charging infrastructure

On August 19, the executive meeting of China’s State Council decided to extend the implementation of EV purchase tax exemption policy until the end of 2023.

The country has implemented the purchase tax exemption policy for EVs since September 2014 and extended the policy twice in 2017 and 2020, separately.

The extension is critical given the country is trying to push ahead on its EV penetration goals of 30% market share by 2025.

While the market has been continuously growing in EV adoption, there has also been constant pressure from the automotive sector to continue extension of subsidies and tax cuts on EVs as the industry continues to deal with rising production and material costs.

For instance, EV related subsidies were supposed to be phased out in 2023 after going through a series of reductions starting from 2020.

However, the government is now considering extension of the subsidies into 2023 as well.

Even for an EV industry like China, which is at quite a mature stage, it is starting to look like subsidies for EV purchase will continue to stay, highlighting that subsidies and tax exemptions are likely to be continued in other countries as well.

However not all EVs will be fit for the purchase tax exemption policy.

The Ministry of Industry and Information Technology (MIIT) has been updating the list of models that can enjoy preferential tax policies, the first of which was released on August 27, 2014, and the latest is the fifty-seventh batch released on August 10, 2022.

In the “green list”, EVs will firstly be divided to battery electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and fuel cell electric vehicles (FCVs). and then will be subdivided into passenger vehicle, commercial vehicle, trucks and special usage ones (garbage trucks, cleaning vehicles, etc.).

As such China has seen large BEV penetration owing to cheap city vehicle models and many options for consumers to choose from.

Besides the EV purchase tax exemption policy, China also plans to build more charging stations and encourage lower charging fees.

Unlike the US, where the government directly invests and builds out the charging infrastructure (such as Electrify America), the Chinese government does so via subsidizing various companies to invest in charging networks.

Chinese automaker BYD operates large networks in tandem with their city bus networks such as Shenzhen.

Recently, Shell’s Chinese division also announced they would continue to expand their presence in the country.

Along with BYD, they aim to operate a network of more than 10,000 charging points in Shenzhen and expand into European cities as well.

The company has also partnered with Nio to explore Battery Swapping solutions.

Shell and BP have been actively pushing ahead on deploying charging infrastructure at already existing petrol pumps.

The partnership of Jio and BP in India hopes to achieve the same.

If other countries follow India’s example, wherein companies that operate petrol pumps receive special incentives for installing EV charging points at the same site, then installation rate would increase greatly globally.

This policy that aims to leverage the existing sprawl of petrol stations to ensure EV charging infrastructure grows to meet consumer demand.