Starting 2026, New Energy Vehicle Purchase Tax Halved; Partially Covers Road Maintenance Fees

Starting January 1, 2026, new energy vehicles (NEVs) will no longer be fully exempt from the vehicle purchase tax. Instead, they will be subject to a 50% reduction of the tax liability, with a cap of RMB 15,000 per vehicle. This adjustment aims to gradually shift part of the road construction and maintenance costs onto NEV owners. Previously, conventional fuel-powered vehicles indirectly contributed to road maintenance expenses through the consumption tax on refined oil products, whereas NEVs—exempt from purchase tax and not using fuel—have long been excluded from sharing these costs. In recent years, NEVs have seen a continuous rise in market share and rapid growth in ownership. Combined with factors such as heavier vehicle weights due to large-capacity batteries—which accelerate road surface wear—the fairness of the existing tax arrangement has drawn increasing attention. According to Ministry of Finance data, national vehicle purchase tax revenue reached RMB 76.7 billion in the first four months of 2024, up 13.3% year-on-year. Under current policy arrangements, NEVs purchased between 2026 and 2027 will benefit from a 50% purchase tax reduction, with the collected tax revenues earmarked specifically for road infrastructure expenditures. Fiscal and tax authorities have stated that no new dedicated road usage fees for electric vehicles will be introduced in the short term, and reforms will proceed gradually. In the near future, differentiated taxation based on vehicle weight may be implemented through consumption tax reforms targeting heavier NEV models. In the medium to long term, the vehicle and vessel tax system will be optimized by incorporating factors such as mileage driven and vehicle weight. Further refinements to the road usage payment mechanism for NEVs will also depend on whether purchase tax incentives are extended beyond 2028.