China Implements a Multi-Pronged Strategy to Drive NEV Boom

As the world’s largest single market for electric vehicles, China has implemented a number of initiatives to support the growth of its thriving NEV sector, including the establishment of a comprehensive charging infrastructure network. NEV (New Energy Vehicles) is a term used to represent Battery Electric Vehicles (BEVs or simply EVs) and Plug-in Hybrid Electric Vehicles (PHEVs) in the Chinese market.

In May, China issued guidelines to support people living in rural areas to purchase and use NEVs, with a focus on boosting the construction of charging infrastructures. By the end of May, China had built more than 6.35 million units of charging infrastructure. Aside from constructing a comprehensive charging infrastructure network, governments at all levels across the country have implemented a slew of regulatory incentives to encourage NEV manufacturing and distribution.

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China’s Anhui province announced a plethora of initiatives in June to build a NEV industrial agglomeration. The province expects its automotive production to exceed 3 million units, with NEVs accounting for more than 40% of the total. Anhui also declared the beginning of an all-inclusive charging infrastructure development at the city, county, and township levels this year during a conference recently held in an effort to encourage the formation of a NEV industrial cluster in the province. By 2025, the province should have almost all of these charging stations available, making Anhui a convenient place for NEV enthusiasts.

Related: 59% NEVs in the World Were Sold in China in Q1, 2023

Guangdong Province in south China launched a number of regulations to promote the purchase of NEVs and improve the driving environment for such vehicles, while Chengdu, the capital of Sichuan Province in southwest China, offers direct financial incentives to companies who manufacture or launch NEV car models.

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Now China has announced that it will prolong its preferential purchase tax policy for NEVs through the end of 2027 in order to further maximize the potential of NEV usage. According to preliminary calculations, the strategy will result in tax exemptions and reductions totaling 520 billion yuan (about $72 billion USD).

Related: BYD Sold Nearly 1.87 Million NEVs Globally in 2022

According to industry sources, China’s NEV sales will reach approximately 9 million units this year thanks to these supportive measures, and the share of NEVs in the country’s vehicle market will reach nearly 60% in 2025, with annual NEV sales of about 17 million units.

Foreign investors are showing an interest in expanding the NEV business. “China has grown into a powerhouse of the international automotive industry,” said Dr. Juergen Hasenpusch, chief finance officer for Volkswagen Anhui, adding that the Volkswagen Anhui NEV project aims to invest a total of 23.1 billion yuan in research and development (R&D), manufacturing, and sales of NEVs in China.

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Volkswagen signed an investment deal in late May to develop an R&D, innovation, and procurement center for fully connected electric vehicles in Hefei, Anhui’s capital. The facility is planned to be operational in early 2024. Tesla also stated in April that it will construct a new mega plant in Shanghai exclusively for manufacturing the company’s energy-storage product Megapack.

China’s NEV market is likely to grow even further with the execution of regulations such as the construction of additional charging stations in rural regions and the exemption of purchase tax, according to Chen Shihua, deputy secretary-general of the China Association of Automobile Manufacturers.

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