(Yicai Global) Jan. 19 -- China will bring in new policies such as extending favorable purchase tax rates and improving battery recycling systems to support the new energy vehicle sector as state subsidies are phased out completely this year, a government ministry said.

The extension of lower NEV purchase tax rates, the improved recycling of electric car batteries and other supportive policies will be introduced as soon as possible so as to stabilize market expectations and ensure the continued healthy development of the NEV industry, the Ministry of Industry and Information Technology said yesterday.

The NEV sector needs to undergo an accelerated development this year in line with the country’s peak carbon emission and carbon neutrality targets, it said, adding that a roadmap for the green development of automobile industry is being drawn up.

China had planned to abolish NEV subsidies by the end of 2020, but delayed the move in light of the pandemic. In April that year, the finance ministry said that from 2020 to 2022 state support would be cut by 10 percent, 20 percent and 30 percent, respectively.

Reduced subsidies will not materially impact sales, the China Passenger Car Association said in a recent report. The NEV sector is now being driven by the market, rather than by policy. Although the withdrawal of grants make the cars more expensive, consumer attitudes have also changed.

NEV sales in China surged more than one-and-a-half times last year from the year before to 3.5 million units, the most in the world for the seventh straight year, according to MIIT data. NEV supporting infrastructure, such as charging and battery swap facilities, is also constantly being upgraded.

Sales are expected to top six million units this year with a penetration rate of 22 percent, the CPCA said.

Editors: Shi Yi, Kim Taylor