China’s EV industry rose with the aid of tax breaks. What happens when they end?

As China is ending tax exemptions that helped fuel the rise of its electric-vehicle (EV) and solar industries, analysts said it could add to the cost of producing an EV and put pressure on manufacturers, as Beijing steps up efforts to curb overcapacity and price wars.The levy could add about 1,000 yuan (US$147) to the cost of producing an EV, analysts estimated – a modest increase per car, but a fresh squeeze on carmakers’ already razor-thin margins.China will levy a consumption tax on lithium-ion batteries and solar cells for the first time in more than a decade, the Ministry of Finance announced on Friday. The tax would be set at 2 per cent for lithium-ion batteries – used in electric vehicles and energy storage – from September 1. solar cells, however, would not be taxed at 2 per cent until April 1. Both rates are scheduled to rise to 4 per cent a year after their respective start dates.