China will lower the export value-added tax (VAT) rebate rate for new energy vehicles (NEVs) from 13% to 9% starting April 1, 2027, scaling back tax support as exports become a key driver of industry growth.
The Ministry of Finance and the State Taxation Administration announced the change on Monday. The 4-percentage-point reduction could put pressure on Chinese automakers’ overseas profits.
The applicable rebate rate will be determined by the export date said on the customs declaration. Existing export consumption tax rebate and exemption policies will remain unchanged for affected products subject to that tax.
The adjustment covers battery electric and plug-in hybrid passenger vehicles, as well as electric buses and electric truck tractors.
The policy comes as Chinese automakers rely on overseas growth to offset declining domestic sales. Lower rebates will add fresh pressure on profitability in that business.
China’s NEV exports rose 130% year-on-year to 4.006 million vehicles in the first 9 months of this year, according to data released earlier today by the China Association of Automobile Manufacturers (CAAM).
September NEV exports jumped 160% year-on-year to 571,000 vehicles, while domestic sales fell 9.4% to 1.252 million. The figures cover both passenger and commercial vehicles.
Export tax rebates refund certain taxes paid during domestic production and distribution. A lower rebate rate means companies receive smaller refunds, all else being equal.
Deutsche Bank estimated in a research note released today that the adjustment will reduce net profit at BYD (HKEX: 1211) by about 5,000 yuan ($743) per exported vehicle, with the impact starting in the second quarter of 2027.
BYD’s overseas sales totaled 1,342,468 vehicles in the first 3 quarters of this year, accounting for about 43% of total wholesale volume, the bank said, underscoring the importance of its international business.
The rebate reduction will also pressure export profits at automakers including Chery (HKEX: 9973), Geely Auto (HKEX: 0175), SAIC Motor (SSE: 600104), GWM (HKEX: 2333), Changan Automobile (SZSE: 000625), Leapmotor (HKEX: 9863), GAC Group (HKEX: 2238) and Xpeng (NYSE: XPEV), Deutsche Bank said.
The move extends China’s tightening of export tax rebate policies for clean-energy products, following earlier reductions for solar photovoltaic and battery products.
China eliminated export VAT rebates for solar photovoltaic products on April 1, 2026, and lowered the rate for battery products from 9% to 6%. Under previously announced plans, battery export tax rebates will be scrapped starting January 1, 2027.
The Ministry of Finance and the State Taxation Administration did not explain the specific reasons for the NEV rebate cut in the announcement. Economists have linked it to the industry’s growing competitiveness and efforts to curb price competition.
Tax support should align with an industry’s stage of development, Luo Zhiheng, chief economist at Yuekai Securities, told Yicai. As industries mature, they should rely more on technology and market competition, he said.
Lower export tax rebates could encourage companies to compete on technology and branding instead of price, Luo said. Deutsche Bank’s analysis, meanwhile, points to potential near-term profit pressure during the adjustment.
This article was first published by Phate Zhang on CnEVPost, a website focusing on new energy vehicle news from China.
