China is scaling back tax support for electric vehicles and plug-in hybrids as the market cools. Since January 2026, buyers have paid a 5% vehicle purchase tax on these models, replacing the full exemption that had applied from 2014 through the end of 2025. The rate is scheduled to reach 10% in January 2028, matching the tax on conventional combustion vehicles.
Battery makers face a separate change. From September 1, lithium-ion batteries used in EVs and plug-in hybrids are again subject to consumption tax, initially at 2%; the rate is set to rise to 4% in September 2027. The exemption began in 2015. EVE Energy says it plans to pass the new 2% charge on to customers. Separately, the export tax rebate for EV batteries fell from 9% to 6% in April, and China plans to end that rebate from January. The source says Beijing intends to retain tax advantages for less established technologies, including sodium-ion and solid-state batteries.
The policy shift comes as domestic new-energy vehicle sales fell 10% year on year in the first half of 2026. EVs and plug-in hybrids accounted for 48% of new vehicle sales, compared with 5% in 2020. China was the world’s leading NEV seller, including exports, for the 11th consecutive year in 2025. With demand softer and incentives shrinking, automakers and suppliers may face tighter margins; the article says the changes could favor larger, more efficient companies.