China Rolls Out $72 Billion in Tax Breaks for New-Energy Vehicles Over Next Four Years

China on Wednesday unveiled a $72 billion package of tax breaks aimed at boosting the purchase of electric vehicles over the next four years, extending an existing policy at a time when auto sales and broader consumption have been flagging.

Shares of EV makers rose on the news, bucking a 2.0% decline in Hong Kong's benchmark Hang Seng Index. Li Auto and XPeng were both up 2.7% in afternoon trading, while Nio was up 3.9%.

New-energy vehicles purchased from 2024 to 2025 will be exempt from a purchase tax of up to 30,000 yuan ($4,177) for each vehicle, with the exemption halving for those bought in the subsequent two years, the Ministry of Finance, the State Administration of Taxation and the Ministry of Industry and Information Technology said in a joint statement.

A finance ministry official said the tax breaks will amount to a total CNY520 billion, according to a transcript of a media briefing.

Li Xiang, founder of Li Auto, welcomed "four years of stabilized policies" in a post on China's Twitter-like Weibo. "There is no excuse" to not to hit the company's 2025 goal to sell 1.6 million vehicles and taking in revenue of CNY500 billion, he added.

The tax break extended a previous policy that has been in place for years in a bid to boost EV market share and help the country to reduce carbon emissions. The exemption applied to battery electric vehicles, hydrogen fuel-cell vehicles and plug-in hybrids.

The policy extension, which was broadly expected among industry observers, comes as Beijing considers ways to boost economic activity after economic indicators ranging from industrial profits to property sales showed signs of cooling. The country's central bank over the past week has trimmed lending and other rates.