China’s State Council is considering continuing a tax exemption for some clean cars for another four years, according to people familiar with the matter, as the government seeks to stimulate consumer demand for new-energy vehicles.

The country’s chief administrative body is convening a meeting on Friday (June 2) to discuss a range of policy measures aimed at boosting the economy. One of those measures may be extending the purchase tax break for electric vehicles (EVs) and plug-in hybrids that cost less than 300,000 yuan (US$42,400 or RM194,530), one of the people said, asking not to be identified because the details are private.

Representatives of China’s State Council didn’t respond to a request for comment.

Cars over that amount are broadly classed as luxury ones in China, so making it easier for people to buy more affordable clean cars would help with the nation’s EV adoption rate and goal of reaching net zero emissions by 2060.

China has been promoting its EV industry for over 10 years, with generous incentives to consumers and subsidies to automakers. Buyers received discounts of as much as 60,000 yuan at one point for purchasing EVs, but this incentive ended in 2022. All new cars have a 10% purchase levy, but for new-energy vehicles, this hasn’t applied since 2014, and was recently extended until the end of 2023.

Even so, lacklustre consumer sentiment coming out of Covid has seen overall new cars sales in the country fall. Deliveries in the first four months of this year declined 1.4%, versus the same period of 2022.

Deliveries of EVs and plug-in hybrids in January through April rose about 36% from the same period of 2022, but that’s well down on the 128% growth from the same four-month period of 2021, according to the China Passenger Car Association.

Decreasing sales have intensified a price war started in China by Tesla Inc that was followed by most major auto companies. Many carmakers’ earnings have taken a hit.

  - Bloomberg