China extends tax breaks for new energy vehicles until 2027

China extended tax breaks for consumers buying clean light vehicles through 2027, estimated to be worth 520 billion yuan ($72.3 billion) in the coming four years, in an effort to bolster its flagging electric-vehicle industry.

The move, announced at a briefing in Beijing on Wednesday, is the latest in a series of steps to lift sales and production in the world’s biggest EV market.

“Even though China has accomplished certain achievements in the new energy vehicle industry, the sector still has problems, including insufficient supply of critical technology and uneven development in the wider market,” said Xin Guobin, an official from the Ministry of Industry and Information Technology. “These need to be responded to.”

While new vehicles are generally subject to a 10 percent sales tax, it hasn’t applied to clean-energy vehicles since 2014 and the policy was recently extended through 2023. Wednesday’s announcement pushes that date to the end of 2025 for clean vehicles priced under 300,000 yuan ($41,700) that don’t seat more than nine people. Cars priced under 150,000 yuan will get further support through the end of 2027.

Officials also reiterated a commitment to building more charging infrastructure and promoting EV sales. They are particularly focused on rural areas, where EVs and plug-in hybrids account for as little as 4 percent of new car sales, compared to the national average of 25.6 percent last year.

China sold nearly 5.67 million clean cars last year, a 90 percent increase from a year earlier. The government has been doling out generous incentives to buyers and subsidies to carmakers for more than a decade to support the sector, leading hundreds of companies to enter the market. Purchasing an EV gave consumers 60,000 yuan back in incentives at one point, though that program ended last year.