The transition from a full exemption to a half-rate reduction for new energy vehicle (NEV) purchase taxes is imminent. In response, automakers such as Deepal, Xiaomi (01810.HK), and NIO (09866.HK) have rolled out subsidy programs to cover the tax difference, with incentives reaching up to RMB 15,000. Is this the perfect time to buy a car?

On October 27, it was noted that several automakers, including Deepal, Xiaomi, NIO, and Li Auto (02015.HK), have introduced purchase tax subsidy schemes for vehicles delivered across the year-end. These programs, which include cash rebates or direct reductions in final payments, aim to offset the tax gap resulting from the policy shift, with subsidies capped at RMB 15,000.

Experts suggest that these measures address both extended delivery cycles and year-end sales targets, serving as a short-term strategy to retain orders and boost sales rather than a long-term solution.

**Subsidies Up to RMB 15,000** On October 25, Deepal announced its "Cross-Year Delivery Purchase Tax Cash Subsidy Plan." Customers who lock in orders by November 30 but receive their vehicles in 2026 due to non-customer delays will qualify for the subsidy, with amounts based on the actual tax difference for their chosen configuration. However, specific subsidy details have yet to be finalized, according to Deepal dealerships in Beijing and Chengdu.

Xiaomi followed suit on October 24, offering a subsidy of up to RMB 15,000 for orders locked before November 30, applicable to its SU7, YU7, and SU7 Ultra models. A Xiaomi sales representative in Chengdu noted that deliveries for current orders are expected by March or April next year, with the subsidy effectively covering the tax difference for vehicles priced under RMB 330,000.

Other brands, including NIO, Li Auto, Zeekr, and HarmonyOS Smart Mobility, have introduced similar programs, targeting popular or newly launched models with longer delivery timelines. For instance, Zeekr’s subsidy covers its 9X, 001, and 7X models, with the refreshed Zeekr 007 set to launch on October 28 amid strong pre-order demand.

**Policy Shift: From Exemption to Half-Rate** The subsidies come ahead of a policy change outlined in a June 2023 joint announcement by China’s Ministry of Finance, State Taxation Administration, and Ministry of Industry and Information Technology. From 2024–2025, NEVs will enjoy a full purchase tax exemption (capped at RMB 30,000 per vehicle), while 2026–2027 will see a half-rate reduction (capped at RMB 15,000).

Industry experts like Yan Jinghui of the China Automobile Dealers Association and Zhang Xiang of the North China University of Technology’s Automotive Innovation Research Center attribute the subsidies to automakers’ efforts to mitigate consumer concerns over delayed deliveries and year-end sales pushes. Zhang noted that the current subsidies present a favorable buying window for consumers.

Cui Dongshu, Secretary-General of the China Passenger Car Association, emphasized that these measures are temporary, aimed at stabilizing 2023 orders, and advised potential buyers to capitalize on the opportunity.

**Market Trends** September saw 2.244 million passenger vehicle sales, with NEVs accounting for 1.299 million (up 15.7% YoY), pushing the penetration rate to 57.8%. October projections estimate 2.2 million total sales, including 1.32 million NEVs, potentially raising penetration to 60%.

(Note: This article does not constitute investment advice. Proceed at your own risk.)