Xiaomi joins subsidy race sparked by China’s EV tax changes

Buying a new electric car in China is about to get more complicated with the EV tax policy changing from next year. This is creating a headache for both customers and makers. The problem is simple: what happens if customers order a car today but it is not delivered until 2026? They could face an unexpected tax bill. Thankfully, major electric car companies, including Xiaomi EV, are stepping in with a solution to calm nervous buyers.

The problem is China's purchase tax for New Energy Vehicles, or NEVs. In June 2023, the Chinese government announced a four-year extension of its popular incentive policy. This policy was a big driver for the country's massive adoption of electric cars. But the extension came with a catch. The benefits will slowly decrease. For 2024 and 2025, buyers are completely exempt from the purchase tax, with the total exemption capped at RMB 30,000 ($4,200).

But things change next year. From 2026 to 2027, the deal is only half as good. The purchase tax for NEVs will be set at a 5%, which is half the standard 10% rate, and the maximum amount a buyer can save is capped at RMB 15,000 ($2,100). This means a customer whose car delivery is delayed from late 2025 to early 2026 could suddenly have to pay quite a bit more than they planned.

Popular EVs from top brands have long waiting lists due to high demand. A company might promise a 2025 delivery, but even a small production delay could push that date into the next year risking a price hike. That is enough to make some buyers think twice.

To prevent customers from delaying their purchases, automakers are now offering a new kind of "insurance." They are promising to pay the difference if their own delays cause a customer to lose the bigger tax break, and Xiaomi EV is the latest to join this list.

The company announced that it will protect customers who lock in their orders by November 30. If Xiaomi's own production issues delay a delivery into 2026, the company will cover the loss of the tax incentive. This policy applies to its full lineup of new electric cars: the Xiaomi SU7 sedan, the SU7 Ultra, and the YU7.

Xiaomi's method is direct. The company will provide the subsidy as a simple cash discount on the final payment. The company has capped this payout at RMB 15,000, which exactly matches the maximum potential tax increase that customers face. This is clearly designed to build trust and lock in sales for its new EVs as the year-end approaches.

Xiaomi, however, is not the first company to use this tactic. Nio, a major competitor in China's premium EV market, made a similar promise earlier. On September 20, Nio launched its third-generation ES8 SUV. The model was an immediate success, quickly selling out its planned production capacity of 40,000 units for the year. With such long wait times, Nio announced that customers whose ES8 deliveries slip into 2026 would get a subsidy of up to RMB 15,000.

Li Auto, another one of China's top EV makers, also saw this problem coming. On September 30, the company pledged to cover potential purchase tax losses for customers. This offer applied specifically to those buying the Li i6 electric SUV before October 31.

These offers are not a new standard for all EVs with the companies being very selective about which models get this protection. Nio has not announced similar policies for its other models and this subsidy does not apply to vehicles under its new sub-brands, Onvo and Firefly. Li Auto's deal was also specific to the Li i6 only leaving buyers of the Li i8 electric SUV potentially out of luck.

Via