China Announces New Tax Exemptions and Technical Standards for New Energy Vehicles Starting 2026

Important Announcement Regarding New Energy Vehicles!

Recently, the Ministry of Industry and Information Technology, the Ministry of Finance, and the State Taxation Administration of China jointly announced the technical requirements for new energy vehicles (NEVs) regarding vehicle purchase tax exemptions for the years 2026-2027. This announcement specifies adjustments to the technical requirements for pure electric passenger vehicles and plug-in hybrid electric vehicles (including range-extended hybrids).

What Adjustments Have Been Made?

Pure Electric Passenger Vehicles

For pure electric NEVs, the new regulations require that the energy consumption for traveling 100 kilometers must not exceed the “energy consumption limit” set by the state for similar vehicles. If a vehicle is particularly heavy—specifically, if its maximum design gross weight exceeds 3.5 tons—it must adhere to the energy consumption standard for the 3.5-ton model. In simpler terms, the heavier the vehicle, the stricter the energy-saving requirements.

Plug-in Hybrid Electric Passenger Vehicles

For plug-in hybrid NEVs, which can be charged and refueled, the new rules outline three conditions that must be met: First, when operating solely on electric power, the “effective range” must be at least 100 kilometers. Second, stricter standards have been set for fuel and electricity consumption. For instance, when the battery is depleted and the vehicle runs on fuel, the fuel consumption must be lower than the “fuel consumption limit” established by the state for similar vehicles. Lastly, similar to pure electric vehicles, if the plug-in hybrid’s maximum design gross weight exceeds 3.5 tons, the standards applicable to the 3.5-ton model must be followed.

When Will These Adjustments Take Effect?

Starting from January 1, 2026, vehicles included in the Catalog of New Energy Vehicles Eligible for Purchase Tax Exemption (hereinafter referred to as the “Tax Exemption Catalog”) must comply with the requirements outlined in this announcement. Vehicles that were already listed in the Tax Exemption Catalog before December 31, 2025, and meet the technical requirements of this announcement will automatically be included in the first version of the Tax Exemption Catalog for 2026. Vehicles that do not meet the requirements will be removed from the Tax Exemption Catalog. Any vehicles that do not comply with this announcement and wish to be included in the first version of the Tax Exemption Catalog for 2026 must complete their application by December 12, 2025. Vehicles that have been removed can reapply for inclusion in the Tax Exemption Catalog.

From January 1, 2026 (inclusive), after the release of the Tax Exemption Catalog for 2026 and beyond, those purchasing NEVs included in the Catalog can enjoy vehicle purchase tax exemptions as per the regulations.

What Impact Will the New Regulations Have on Automakers and Consumers?

For consumers, vehicles that do not meet the new technical requirements will not qualify for the purchase tax exemption, leading to changes in car ownership costs. Some outdated models may exit the market due to non-compliance with the new requirements, potentially narrowing the range of models available to consumers in the short term. However, in the long run, this will encourage the market to offer more high-quality products, prompting consumers to pay closer attention to technical specifications and make informed choices.

Cui Dongshu, Secretary-General of the Passenger Car Association, believes that the new regulations will promote upgrades in battery capacity and hybrid systems, optimizing the driving experience and enhancing product safety and competitiveness. “Strict standards will drive companies to launch higher-performance models that meet consumers’ demands for long range and low energy consumption, while also supporting green, low-carbon development and achieving a win-win situation for industrial and consumer upgrades,” said Lang Xuehong, Deputy Secretary-General of the China Automobile Dealers Association. “This adjustment imposes higher energy consumption requirements on certain models, which will help eliminate outdated production capacity and enhance the overall technical level of new energy vehicles.”