Export Tax Rebate Reduced by 4 Percentage Points, New Energy Vehicle Overseas Expansion Enters "Hard Power" Era | Auto-First

October 12, 2026, the Ministry of Finance and State Taxation Administration issued an announcement: Starting from April 1, 2027, the value-added tax export rebate rate for new energy vehicles will be reduced from 13% to 9%. Thus, PV tax rebates have been zeroed out, battery tax rebates are being phased out, and among the "New Three Items", the last category enjoying full tax rebates, complete vehicles, has also clearly welcomed a reduction in the rebate rate.

Roughly calculating with a vehicle priced at 150,000 yuan FOB, the rebate amount drops from about 19,500 yuan to 13,500 yuan, reducing 6,000 yuan less per vehicle. Institutions such as CLSA estimate that the net profit margin for some EV export businesses is only around 10%. These 4 percentage points are enough to turn a significant number of models from "profitable" to "working for nothing".

Additionally, the impact is uneven. BYD has already promoted local production in Hungary and Brazil, and Great Wall Motor has planned capacity in Thailand, Brazil, and Russia. The overseas sales of these enterprises are not affected by the change in export tax rebates. The ones truly under pressure are small and medium-sized car companies that rely on low prices to boost volume, have no brand premium, and are unable to build factories overseas. They cannot raise prices to pass on costs nor have internal space to absorb them.

Industry insiders analyze that on one hand, tax support should match the industry lifecycle. After the industry matures, it should rely more on market forces. Reducing tax rebates can to some extent reduce involutionary competition, shifting enterprises from price competition to technology and brand competition.

On the other hand, previously high rebate rates allowed some car manufacturers to cover losses with returned taxes even if selling overseas below cost. This model is not only unsustainable but also continues to attract pressure from EU anti-subsidy investigations.

Reducing tax rebates is for rectifying "involution spill-over" domestically, and for reducing trade friction risks externally.

From January to September 2026, new energy vehicle exports reached 4.006 million vehicles, a year-on-year increase of 1.3 times, with the share of auto exports exceeding 50% for four consecutive months. The foundation of competitiveness for China's new energy vehicles is the systemic capability formed by the industrial chain, "three-electrics", and intelligence, rather than tax rebate bonuses. After the PV export tax rebate was zeroed from 9%, exports continued to maintain high growth, which is already a warning from the past.

Worth noting is the "rush export" window. Referencing the experience of PV and batteries, it is highly likely to repeat the "rush export" before the policy is implemented. Overseas dealers accelerate orders, enterprises rush to declare customs before April 1, 2027, export data will surge first then fall, but this does not change the long-term logic.

The real question is, after policy bonuses are removed, who can continue to profit without relying on tax rebates. Either move capacity overseas, or make product premiums high enough to cover costs.

Today, October 12, the Ministry of Commerce answered reporters' questions on the EU-China hybrid and electric vehicle consultation consensus. Regarding hybrid vehicles, both sides emphasized and confirmed three basic principles.

First is respecting facts. According to Eurostat data, the EU imported 107,000 hybrid cars from China in 2024, and 302,000 in 2025. Both sides reached an upward arrangement based on 2025 to ensure export space and stable growth for Chinese enterprises, accommodating reasonable concerns of both industries based on reality. Second is non-discrimination. Any measures will not specifically target Chinese products, nor treat Chinese enterprises discriminatively. China's quota will not be lower than any other import source for the EU. Third is compliance. Both sides confirmed trade arrangements should comply with WTO rules. China retains all rights under the WTO framework to seek dispute settlement, demand trade compensation, etc. These three basic principles run through, forming a solid foundation for safeguarding the legitimate rights and interests of Chinese enterprises.

Obviously, regarding auto exports, we are at a critical moment on the tip of the spear.

4 percentage points will not reverse the trend of China's EVs going global. The main engine of cost advantage has long been switched from tax rebates to industrial chain depth, technology gaps, and scale effects. Only car enterprises accustomed to the moat of tax rebates will panic.