Source: Wall Street News

Recently, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Industry and Information Technology jointly issued the “Notice on Continuing and Optimizing the New Energy Vehicle Purchase Tax Relief Policy”, stating that the NEV purchase tax exemption policy will continue to be extended in a stepwise manner for four years until 2027.

Among them, the period 2024 and 2025 were fully exempted, while the levy was halved in 2026 and 2027. Furthermore, this policy clarifies that the upper limit of exemptions for the two stages is 30,000 yuan and 15,000 yuan, respectively.

According to Wall Street News and Insight Research, this is not the first time that China has implemented the NEV purchase tax exemption policy, but judging from the recent round of NEV purchase tax deferral policies, which are completely different from previous rounds, there are announcements on extension time limits, tiered tax exemptions, and tax reduction caps, etc., this is most likely the last time.

1. Unlike the previous three extensions, this round may be the last renewal round

The official implementation of China's new energy vehicle purchase tax exemption policy dates back to 2014, which has been implemented for about nine years. It should have completely ended at the end of 2019, but in order to support the development and progress of new energy vehicles, the increase in the penetration rate of new energy vehicles, and cope with the adverse effects of the epidemic, China extended it three times in 2017, 2020, and 2022, respectively. This round is the fourth extension, but it is most likely the last time.

Wall Street Insights and Insights Research suggests that the extension of the NEV purchase tax in this round is very necessary.

First, 2022 is the year when China's NEV subsidies are completely withdrawn. For NEV companies and consumers, the cost pressure of up to 12,600 yuan and 0.48 million yuan has been increased depending on the differences between pure electric models and plug-in hybrid models. For example, the withdrawal of NEV purchase tax again in 2023 will have a significant impact on NEV companies and markets (taking this purchase tax exemption cap as an example, they will have to increase car purchase costs by another 30,000 yuan).

Second, from a global perspective, in the other two major NEV markets, Europe is still in the NEV subsidy cycle and has chosen to vigorously develop the NEV industry, while the US has introduced exclusive new energy policies such as IRA to strongly support the local NEV industry. Although China's new energy vehicle market is steadily number one in the world, in the face of external shocks and challenges, it is also necessary to slow down the pace of policy support withdrawal appropriately.

It is worth noting that this round of NEV purchase tax extensions is different from previous rounds. There have been changes in the extension period, tiered tax exemptions, and tax reduction limits.

Although the extension of the new energy vehicle purchase tax exemption policy did not give different treatment to pure electric models and plug-in hybrid models, it determined the overall tax reduction limit. Compared with the current policy of total NEV purchase tax reduction (about 10% of the price of new energy vehicles), the tax exemption amount for each new energy passenger vehicle in 2024 and 2025 will not exceed 30,000 yuan, while the tax exemption amount for each new energy passenger vehicle in 2026 and 2027 will not exceed 15,000 yuan.

Furthermore, compared to the previous three rounds of extension, which ranged from 1 to 3 years, the NEV purchase tax has now been extended for a full 4 years, and it is a tiered reduction. 2024 and 2025 are completely exempt, while 2026 and 2027 were reduced by half. This is quite similar to the withdrawal of China's previous fuel vehicle purchase tax exemption policy. It gradually declined from 5% levy to 7.5% levy, and finally full levy. This round of NEV purchase tax deferment is likely to be the last time

2. The extent to which major NEV companies have benefited varies

This round of the NEV purchase tax extension policy did not discriminate between pure electric models and plug-in hybrid models, demonstrating the importance of plug-in hybrid models in the development of new energy vehicles in China. Therefore, whether it is new energy vehicle companies such as Tesla and NIO, which specialize in pure electric models, or companies such as Ideal that have only temporary range extensions and plug-in hybrids, or car companies such as BYD, Great Wall, and Geely, which are actually affected by the price of pure electric models and plug-in hybrids, all benefit equally.

Since the new energy vehicle purchase tax extension policy makes it clear that the upper limit of the tax reduction amount is 30,000 yuan and 15,000 yuan in the next two stages, according to the current tax rate of 13%, NEV purchase tax = 10% × [NEV invoice price/ (1 +13%)]. In other words, only NEV products with a tax-inclusive price of 339,000 yuan or less are completely exempt; products over this price will need to be taxed on the portion that exceeds that price.

This means that starting next year, consumers of high-end new energy vehicles will not pay purchase tax at all. They will need to pay the corresponding purchase tax in addition to the 30,000 tax exemption limit.

Of course, looking at the current price of 339,000 yuan, for the current best-selling models of mainstream NEV companies, it is actually basically all covered, but since the major NEV companies have different strategies for full brand price coverage, market decline, or high-end positioning, the extent to which the major NEV companies benefit is not the same.

(1) BYD

BYD, which is at the top of the retail sales list of new energy vehicles, currently, whether it's the Dynasty series products such as Han and Tang or the Ocean series of seals and dolphins, whether they are pure electric models or plug-in hybrid models DMI, their respective price positions are basically below 339,000 yuan, so they can fully enjoy the full purchase tax relief.

However, it is worth noting that the price of the main models of BYD's current gradually gaining momentum brand and subsequent brands, such as the N7, U8, and U9, is basically far over 339,000 yuan. Not only is it difficult to get too many purchase tax deductions, but it even once made the market worry about whether the high price of the product would trigger a further “luxury car tax” (only passenger cars with a retail price of 1.3 million yuan or more need to be paid).

(2) Tesla

Before Tesla made a drastic price cut at the beginning of this year, even without considering the high-end models Model S and ModelX, the price of its products, especially the popular Model Y, was still higher than the price of 339,000 yuan.

However, at present, the price of Tesla's Model 3 rear-wheel drive version is only around 230,000 yuan, and the high-performance version is only around 332,000 yuan, stuck at a critical point; while the price of the rear-wheel drive version and long-life version of the Model Y is only around 264,000 yuan and 314,000 yuan, meeting the requirements; only the high-performance version is 364,000 yuan higher than the requirements.

Considering that the high-performance version of Tesla's Model Y does not account for a high proportion of sales in China, Tesla is also basically able to fully enjoy the purchase tax relief for new energy vehicles.

(3) New forces in car building

New energy vehicle products owned by China's popular new car builders, such as Nanyao, Xiaopeng, and Zero Run, basically meet the requirements of 339,000 yuan or less. The main impact is NIO, which specializes in high-end pure electric models, and the ideals of expensive models that temporarily focus on extended range models.

NIO has always adhered to its position as a high-end brand. Its main models, such as the ES8, ET7, EC7, and EC6, are all over 400,000 yuan. The recent wave of slight price cuts has only forced the single ET5 to fall below 300,000 yuan to 298,000 yuan, but overall, NIO's models basically exceed the requirement of 339,000 yuan.

However, the new energy vehicle purchase tax policy has some preferential treatment for new energy vehicles in the power exchange model. When a new energy vehicle without a power battery and a power battery separately accounts for sales and issues separate invoices, the tax-free price stated in the uniform motor vehicle sales invoice obtained by the buyer for the purchase of a new energy vehicle without a power battery is the taxable price of the vehicle purchase tax.

In other words, NIO's previous card for separating vehicle electricity from BAAS is helpful at this time. If you only look at the prices of NIO's new energy vehicle products without power batteries alone, NIO's main models ET5 and ES6 all fully meet the requirements of less than 339,000 yuan, while the other two main models, the ET7 and ES7, are only 20,000 yuan to 30,000 yuan in gap from this requirement. It is not ruled out that NIO once again made them meet the requirements through price cuts.

Ideally, the price of the main model, the L9, is as high as 450,000 yuan, far exceeding the required upper limit, but the L7 AIR and PRO versions, as well as the L8 AIR version, are basically stuck at the threshold of 339,000 yuan (about 800 yuan), and can still basically enjoy the full purchase tax relief for new energy vehicles.

Moreover, as far as the ideal is concerned, the biggest benefit of this round of the NEV purchase tax exemption extension policy is not only that some of its products can benefit, but also affirms the position of extended range and plug-in hybrid models in China's NEV industry. At least for the next four years, they will receive the same treatment as pure electric models, and will no longer be a transition product that has always been criticized by the market.

The NEV subsidy policy was completely withdrawn at the end of last year. The NEV purchase tax relief policy has also begun to decline this year. It can be clearly seen that these support policies to reduce the pressure on the NEV industry in the early to medium term development costs are gradually being withdrawn. After the penetration rate of new energy vehicles in China exceeds 25%, policy orientation is no longer the main driving factor for China's NEV industry. Breakthroughs in new three electric technologies, improvements in intelligent configuration, and improvements in terminal product upgrades will continue to lead the world. cards.

Editor/jayden