China is rolling back some tax support for new-energy vehicles (NEVs), a category that includes battery-electric cars and plug-in hybrids. A 2% consumption tax on lithium-ion batteries used in NEVs returned on September 1, 2026, and is scheduled to rise to 4% in September 2027. Battery makers and automakers may pass the added cost on to customers; Chinese battery producer EVE Energy reportedly plans to include the 2% tax in its battery prices.
Vehicle purchase-tax relief is also being phased out. NEVs were fully exempt from the 10% purchase tax from 2014 through the end of 2025. Purchases have faced a 5% rate since January 2026, and the rate is due to reach 10% in January 2028, matching the tax applied to conventional combustion-engine vehicles.
The changes come after years of rapid market growth. China ranked first worldwide in NEV sales, including exports, for 11 consecutive years through 2025, while NEVs accounted for 48% of new-vehicle sales in China, up from 5% in 2020. However, domestic demand has slowed: sales of environmentally friendly vehicles fell 10% in the first half of 2026, according to the report.
The article links the slowdown partly to weaker consumer spending amid China’s property downturn. With incentives being reduced and more costs potentially passed through, the changes could affect both vehicle prices and the supply chain, as well as the competitive market that government support helped foster.