Purchase tax exemption "renewal fee", how do star car companies benefit? | Jianzhi Research

Recently, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Industry and Information Technology jointly issued the "Announcement on Continuing and Optimizing the Policy of Exemption from Vehicle Purchase Tax for New Energy Vehicles", stating that the policy of exemption from vehicle purchase tax for new energy vehicles will be extended in a staggered manner for four years until 2027.

During the period from 2024 to 2025, the tax will be fully exempted, while in 2026 and 2027, it will be reduced by half. In addition, this policy clearly defines the upper limit of the exemption amount for the two stages, which are 30,000 yuan and 15,000 yuan, respectively.

Huawei Wall Street sees wisdom research believes that the extension of the policy of exempting purchase tax for new energy vehicles is not the first time that China has implemented it. However, from the announcement of this round of new energy vehicle purchase tax extension policy in terms of the extension deadline, staggered exemption and reduction, and the upper limit of tax reduction, it is very likely to be the last time.

1. Different from the previous three extensions, this round may be the last extension

The formal implementation of the first tax exemption policy for new energy vehicles in China can be traced back to 2014, which has been implemented for about nine years. It should have ended completely at the end of 2019. However, during this period, in order to support the development and progress of new energy vehicles, the growth of the penetration rate of new energy vehicles, and to cope with the adverse effects of the epidemic, China has carried out three extensions in 2017, 2020, and 2022 respectively. This round is the fourth extension, but it is very likely to be the last one.

Huawei Wall Street sees wisdom research believes that this round of extension of new energy vehicle purchase tax is necessary.

First of all, 2022 is the year when China's new energy vehicle subsidies are completely withdrawn. For new energy vehicle companies and consumers, according to the different pure electric and plug-in hybrid models, the cost pressure has increased by up to 12,600 yuan and 4,800 yuan respectively. If the new energy vehicle purchase tax is withdrawn again in 2023, it will have a significant impact on new energy vehicle companies and the market (taking the upper limit of the tax exemption for vehicle purchase tax as an example, the cost of purchasing a car will increase by another 30,000 yuan).

Secondly, from a global perspective, the other two major new energy vehicle markets, Europe is still in the cycle of new energy vehicle subsidies, choosing to vigorously develop the new energy vehicle industry, while the United States has launched exclusive new energy policies such as IRA to vigorously support the local new energy vehicle industry. Although China's new energy vehicle market is steadily ranked first in the world, it also needs to appropriately slow down the rhythm of policy support in the face of external shocks and challenges.

It is worth noting that this round of extension of new energy vehicle purchase tax is different from the previous rounds in terms of extension deadline, staggered exemption and reduction, and the upper limit of tax reduction.

Although this round of extension of the policy of exempting purchase tax for new energy vehicles did not give different treatment to pure electric and plug-in hybrid models, it determined the overall upper limit of tax reduction. Compared with the current policy of fully exempting vehicle purchase tax for new energy vehicles (about 10% of the price of new energy vehicles), the tax exemption amount for each new energy passenger car in 2024 and 2025 will not exceed 30,000 yuan, while the tax exemption amount for each new energy passenger car in 2026 and 2027 will not exceed 15,000 yuan. In addition, compared with the previous extension period of 1 to 3 years for three rounds, the purchase tax for new energy vehicles has been extended for a full 4 years this time, and it is a tiered reduction. It will be completely exempted in 2024 and 2025, and then reduced by half in 2026 and 2027. This is similar to the previous tax reduction policy for fuel vehicles in China, which gradually decreased from 5% to 7.5% and finally to complete collection. This round of new energy vehicle purchase tax extension is likely to be the last.

2. Different degrees of benefit for major new energy vehicle companies

This round of new energy vehicle purchase tax extension policy did not distinguish between pure electric and plug-in hybrid models, demonstrating the importance of plug-in hybrid models in the development of new energy vehicles in China. Therefore, whether it is new energy vehicle companies specializing in pure electric models such as Tesla and NIO, or companies such as Ideal that temporarily dominate extended-range and plug-in hybrid models, or BYD, Great Wall, and Geely, which focus on both pure electric and plug-in hybrid models, they all benefit equally. The real impact is actually on the price of automobile products.

Since this round of new energy vehicle purchase tax extension policy clearly stipulates that the upper limit of the tax reduction amount is 30,000 yuan and 15,000 yuan respectively in the next two stages, calculated according to the current tax rate of 13%, the purchase tax for new energy vehicles = 10% × [new energy vehicle invoice price / (1+13%)]. In other words, only new energy vehicle products with a pre-tax price below 339,000 yuan are completely exempt from tax, and products above this price range need to be taxed on the excess part.

This means that starting next year, consumers of high-end new energy vehicles will be different from before, and they need to pay the corresponding purchase tax beyond the tax-free limit of 30,000 yuan.

Of course, at present, the price of 339,000 yuan is basically within the reach of the current mainstream hot-selling models of major new energy vehicle companies. However, due to the different strategies of major new energy vehicle companies in terms of brand coverage, market sinking, or high-end positioning, the degree of benefit for major new energy vehicle companies is also different.

(1) BYD

BYD, which ranks first in new energy vehicle retail sales, currently has products such as the Wangchao series, such as Han and Tang, and the marine series, such as the seal and the Longbridge Dolphin, whether they are pure electric or plug-in hybrid models DMI, their respective price positioning is basically below 339,000 yuan, and they can fully enjoy the full amount of purchase tax reduction.

However, it is worth noting that BYD's gradually strengthening Tang brand and the main models of the upcoming Yangtze River Delta brand, such as N7, U8, and U9, have prices that are basically far above 339,000 yuan, which not only makes it difficult to obtain more purchase tax reduction benefits, but also makes the market worry that the high price of the product will trigger further "luxury car tax" (only passenger cars with a retail price of more than 1.3 million yuan need to be paid).

(2) Tesla

Before Tesla made a significant price cut earlier this year, even if we do not consider high-end models such as Model S and Model X, the prices of its products, especially the popular Model Y, are still higher than 339,000 yuan. However, at present, the price of Tesla's Model 3 rear-wheel drive version is only about RMB 230,000, and the high-performance version is only about RMB 332,000, which is at the critical point. The rear-wheel drive version and long-endurance version of Model Y are also priced at around RMB 264,000 and RMB 314,000, respectively, which meets the requirements. Only the high-performance version is priced at RMB 364,000, which is higher than the requirement.

Considering that the high-performance version of Tesla's Model Y accounts for a relatively small proportion of sales in China, Tesla can basically enjoy full purchase tax exemption for new energy vehicles.

(3) New forces in car manufacturing

Most of the new energy vehicle products under popular new car manufacturing forces in China, such as Nezha, Xiaopeng, and Lingpao, basically meet the requirement of below RMB 339,000. The main affected ones are NIO, which specializes in high-end pure electric vehicle models, and Ideal, which currently mainly produces high-priced models with extended range.

NIO has always adhered to a high-end brand positioning. Its main models, such as ES8, ET7, ES7, EC7, and EC6, are basically priced at over RMB 400,000. A recent wave of small price reductions has only allowed a single model, ET5, to barely enter the level below RMB 300,000 at RMB 298,000. However, overall, NIO's models are mostly above the requirement of RMB 339,000.

However, the new energy vehicle purchase tax policy provides some preferential treatment for new energy vehicles with battery swapping mode. When new energy vehicles without power batteries and power batteries are separately accounted for and separate invoices are issued, the untaxed price stated on the unified invoice for the sale of motor vehicles obtained by the purchaser for the purchase of new energy vehicles without power batteries is used as the taxable price for vehicle purchase tax calculation.

In other words, NIO's card of separating the vehicle and battery, BAAS, is helpful at this time. If only the prices of NIO's new energy vehicle products without power batteries are considered, NIO's main models, ET5 and ES6, fully meet the requirement of below RMB 339,000. The other two main models, ET7 and ES7, are only RMB 20,000 to RMB 30,000 away from the requirement, and it is not ruled out that NIO will lower the prices again to meet the requirement in the future.

As for Ideal, the price of its main model, L9, is as high as RMB 450,000, far exceeding the upper limit of the requirement. However, the AIR and PRO versions of L7, as well as the L8 AIR version, are basically at the critical point of RMB 339,000 (about RMB 800 higher), and can still enjoy the full purchase tax exemption for new energy vehicles.

Moreover, for Ideal, the biggest beneficiary of this round of new energy vehicle purchase tax exemption policy delay is not only some of its products that can benefit, but also confirms the position of extended range and plug-in hybrid models in China's new energy vehicle industry. At least in the next four years, they can receive the same treatment as pure electric vehicle models, and are no longer transitional products that have been criticized by the market.

The new energy vehicle subsidy policy has been completely withdrawn at the end of last year, and this year's new energy vehicle purchase tax exemption policy has also begun to enter the phase of reduction. It can be clearly seen that these support policies that reduce the cost pressure of the new energy vehicle industry in the early and middle stages of development are gradually withdrawing. After the penetration rate of new energy vehicles in China exceeds 25%, policy guidance is no longer the main driving factor for China's new energy vehicle industry. The breakthrough in new technologies for the three electric systems, the improvement of intelligent configurations, and the upgrading of terminal products will continue to keep China's new energy vehicle industry at the forefront of the world and maintain its competitive edge.