Xiaomi EV becomes latest to offer subsidies to offset impact of China's tax incentive retreat

Xiaomi (HKG: 1810) has become the latest company to introduce subsidies to mitigate the impact of China's purchase tax incentive retreat, as a key policy is set to change next year as planned.

Xiaomi EV, the smartphone giant's electric vehicle unit, announced today that for customers locking in orders by November 30, the company will cover the potential loss of purchase tax subsidies they would have received this year if delivery is delayed to 2026 due to its reasons.

This applies to the Xiaomi SU7 sedan, SU7 Ultra sedan, and YU7 SUV (sport utility vehicle).

Xiaomi EV will provide this subsidy through a final payment cash discount, ensuring users incur no additional vehicle purchase tax expenses.

China announced in June 2023 that its new energy vehicle (NEV) purchase tax incentive policy would be extended for four years, though the subsidy intensity would gradually decrease.

From 2024 to 2025, China continues to exempt NEVs from purchase tax, with a maximum tax exemption per vehicle capped at RMB 30,000.

From 2026 to 2027, China's NEV purchase tax will be levied at half the standard rate of 10 percent -- effectively a 5 percent tax rate.

On September 20, Nio launched its third-generation ES8 SUV, which quickly sold out its planned production capacity of 40,000 units this year.

Nio has yet to announce similar policies for other models, including those under its sub-brands Onvo and Firefly.

On September 30, Li Auto (NASDAQ: LI) pledged to cover potential vehicle purchase tax benefit losses for customers purchasing its Li i6 electric SUV before October 31.

Li Auto has yet to announce similar subsidies for other models, including the Li i8 electric SUV, which launched on July 29.