(Yicai Global) April 23 -- China will continue to exempt new-energy vehicles from purchase tax until the end of 2022 to kick start an auto recovery, according to three national ministries.

The policy renews a similar rule the central government originally planned to run from 2018 through 2020, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Industry and Information Technology said in a joint statement yesterday.

The tax and industry regulators keep a catalogue of models eligible for the tax break, including pure-electric, plug-in hybrid and fuel cell vehicles.

The move will help stabilize consumer confidence and could result in a profit guarantee for carmakers and dealers if subsidies are further extended, WM Motor founder Shen Hui told Yicai Global.

China’s national NEV sales in the first quarter tallied just 114,000, down 56.4 percent on the year with the Covid-19 pandemic weighing heavy on sales.

“The electric car sector should undergo stable development in the coming five years,” added Liu Kun, a senior consultant at positioning consultancy Ries. “Extending the current two-year new-energy vehicle purchase tax emption policy will not stimulate the return of new-energy vehicles to high growth as is not a new favorable policy.”

The following five years should be when the sector really thrives, Liu said, adding that 2025 to 2030 will be a “golden development period” for the market, with NEVs making up 30 percent of China’s auto sector in 2030.

His firm’s predictions for this year are less optimistic, with Ries’ latest industry analysis suggesting sales could fall as much as 90 percent annually in 2020, plagued by the virus outbreak and the economic downturn it causes as well as the consumer attitude towards NEVs being a higher-end product.

Editors: Xia Ruirui, James Boynton