CPCA’s Cui Dongshu: High Probability of NEV Purchase Tax in 2026

Is 2025 the final year for full NEV purchase tax exemption in China?

As we enter September, China’s auto market remains vibrant with new model launches and fierce price wars. But one key timeline stands out: with less than four months left before 2026, 2025 may well be the last year of full purchase tax exemption for NEVs.

Cui Dongshu, Secretary-General of the China Passenger Car Association (CPCA), recently stated in an interview that there is a high probability that NEVs will be subject to a 5% purchase tax starting next year. This means that from 2026 onward, the tax incentive will shift to a “50% reduction” phase, marking a turning point for the market environment.

This move was largely anticipated: in June 2023, China’s Ministry of Finance and other agencies issued a notice extending the NEV purchase tax exemption for the fourth time. Since its initial introduction on September 1, 2014, the policy had been extended three times in 2017, 2020, and 2022.

Over the past decade, tax exemptions and other incentives have driven NEV penetration from just 0.3% in 2014 to 55.3% as of August 2025.

According to data from the China Association of Automobile Manufacturers, 8.2 million NEVs were produced and sold from January to July 2025, a year-on-year increase of nearly 40%, with a penetration rate reaching 45%. Policy support combined with industrial maturity has put NEVs on the fast track and enabled Chinese automakers to make major breakthroughs in this segment.

However, policy support won’t last forever. Under the current notice, NEVs purchased between January 1, 2026 and December 31, 2027 will be taxed at half the standard vehicle purchase tax, with the reduction capped at RMB 15,000 per passenger vehicle.

For example, buyers of NEVs priced at or below RMB 300,000 will pay a 5% purchase tax directly. For vehicles priced above RMB 300,000, the tax will be calculated at 10%, minus the RMB 15,000 maximum deduction.

In the long run, reinstating the purchase tax is inevitable and signals a shift from policy-driven to market-driven growth for NEVs.

The real question is whether the current high penetration can be sustained once costs rise in 2026, and whether demand for premium NEVs will cool. Will consumers delay purchases? Will automakers step in with subsidies or financing plans to “pay the tax” on behalf of buyers?

What’s clear is that automakers will need to rely on genuine product strength and solid service to win over users — proving that Chinese NEVs can stand on their own even without policy support.