China agreed to extend tax breaks and subsidies on electric-vehicle purchases for two years to provide relief for the struggling industry in the wake of the coronavirus pandemic.

The government will keep waiving the 10% sales tax on EVs, a benefit that began in 2014 and was due to expire at the end of this year, through 2022, state broadcaster CCTV reported Tuesday, citing a state council meeting chaired by Premier Li Keqiang. The state council also agreed to prolong subsidies for EV purchases for two years, according to the broadcaster.

The measures, which also apply to fuel-celled and plug-in hybrid vehicle purchases, illustrate the latest government efforts to help the world’s second-largest economy recover from a pandemic that’s upended daily life across the globe. China’s top leaders have signaled they will increase fiscal and monetary stimulus this year because of the coronavirus.

China currently levies the full 10% purchase tax on gasoline cars, though industry lobbying groups such as the China Association of Automobile Manufacturers have called on the government to cut it.

The state council decision confirms a Bloomberg reportin February that cited people familiar with the matter as saying that Chinese authorities were considering prolonging subsidies for EV purchases -- as much as 25,000 yuan ($3,500) per vehicle -- beyond this year. The government is also exploring relaxing some emissions standards to provide relief for combustion carmakers, people familiar with the matter have said.

The auto industry has been hit particularly hard in the wake of the coronavirus, with weekly car sales plunging as much as 96% at one point. Geely Automobile Holdings Ltd., one of the country’s top automakers, warned on Monday it expects 2020 to be its most difficult year ever.

But Chinese electric carmakers have counted on government support over the past decade to stay in business. That’s benefited the likes of BYD Co., BAIC BluePark New Energy Technology Co. and NIO Inc., helping make China the world’s largest market for EVs.

To contact Bloomberg News staff for this story:
Tian Ying in Beijing at ytian@bloomberg.net;
Dandan Li in Beijing at dli395@bloomberg.net

To contact the editors responsible for this story:
Young-Sam Cho at ycho2@bloomberg.net

Anthony Palazzo

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