China has started phasing out tax incentives for new energy vehicles (NEVs), a move that will gradually raise the cost of electric cars and their batteries.
From September 1, 2026, China has introduced a 2% consumption tax on lithium and lithium‑ion batteries, ending their previous exemption. This rate is scheduled to increase to 4% from September 1, 2027.
For an EV using a 60 kWh battery, the 2% tax adds around $62 (about Rs 8 lakh at current exchange assumptions) to battery cost. Once the rate reaches 4%, the extra burden rises to about $125, roughly Rs 16 lakh.
Vehicle purchase-tax support for NEVs is also being cut. From January 2026, a former full purchase-tax exemption has been replaced with a 50% reduction, giving an effective tax rate of 5%, and capping the benefit at about $2,200 per vehicle (around Rs 28 lakh).
From January 1, 2027, China will remove some vehicle-and-vessel tax breaks for NEVs. Plug-in hybrids, range-extender EVs and certain commercial electric vehicles will lose these exemptions.
These changes are expected to increase battery and production costs for Chinese EVs over time. Export prices to markets like Nepal could rise, though manufacturers may absorb part of the impact to keep models competitive.
Chinese brands including **BYD, MG, Changan, Geely, Leapmotor and Deepal already sell in Nepal, so their pricing strategies will be closely watched. For now, Nepal-side prices and offers have not been revised or announced specifically in response to these Chinese tax changes**.
Despite tightening tax support, China continues to invest heavily in charging and battery-swapping infrastructure, signalling long-term commitment to electrification even as direct subsidies are rolled back.
Writes on vehicle pricing, taxation and the Nepali auto market from ongoing tracking of distributor price lists. Editorial policy.
