Analysts of Japan’s largest investment bank Nomura said on Tuesday that China’s plan to reinstate the electric vehicle purchase tax in 2026 may cause consumers to rush to buy EVs before the year end.
The firm noted that the measure is expected to boost sales in the short term but expects a sharp decline when the tax is reinstated.
To increase EV adoption, Beijing has waived the purchase tax on electric vehicles until 2025.
According to Nomura, this policy played a major role in supporting China’s economic growth after the property market collapse in 2021.
However, from the first day of 2026, electric vehicles in China will start facing an initial minimum rate of 5% — half of the 10% tax applied to vehicle purchases in the country.
Up until the end of 2027, new energy vehicles (NEV) are subject to a 50% reduction in the tax, which applies as long as the tax reduction for each vehicles does not exceed 15,000 yuan (about $2,100).
This means that premium and luxury NEVs might not benefit from the tax reduction and will see the 10% reinstated from the beginning of 2026.
Amid the upcoming tax policy change, Nio has introduced a program for buyers of its newly launched ES8 model.
The premium EV maker is granting each order locked in before December 31, a voucher covering any additional purchase tax incurred if invoicing and delivery slip into 2026 due to Nio‘s production or logistics delays.
The subsidy can be applied directly against the vehicle price, with the limit of 15,000 yuan. Nio said the value will be automatically calculated based on the actual purchase price.
Nomura analysts also noted that reinstating the EV purchase tax could prompt more purchases in the coming months, partially offsetting the weakening impact of trade-in programs, as many consumers have already traded in their old products.
Trade-in programs, usually implemented by companies themselves, allow customers to exchange their old items for new ones, often with incentives or discounts.
In March 2024, China launched a government-funded trade-in program, providing subsidies for consumers who exchanged products for more efficient alternatives, including home appliances, electronics, and vehicles.
The program aimed to boost domestic consumption and was expanded in 2025, with funding doubled to 300 billion yuan.
