Cui Dongshu, the secretary general of the China Passenger Car Association (CPCA), has proposed a radical reform of China's road tax system to address the challenges posed by the rapid growth of new energy vehicles (NEVs). This proposal comes at a critical juncture as the country's auto market undergoes a significant energy transition, with NEVs rapidly gaining market share.
The traditional road tax system, which is based on fuel consumption, is no longer sustainable. As Cui points out, NEVs, which consume no fuel, have been using public road resources without contributing to the tax burden. This creates an unfair situation where fuel vehicle users indirectly pay for road maintenance through refueling, while NEV owners benefit from the roads without contributing financially.
To address this imbalance, Cui suggests a statutory vehicle road use tax, which would be based on driving mileage and vehicle weight. This approach would rely on data from China's Beidou navigation satellite system and the national vehicle supervision platform, ensuring accuracy and fairness.
The proposed tax system aims to encourage consumption and benefit the people. Cui emphasizes that the new tax should not increase the burden on ordinary families, especially those using cars for commuting. He suggests setting an annual tax-free mileage quota for private cars, ensuring that most daily commutes and short-distance trips remain tax-free.
A key aspect of the proposal is the separation of commercial vehicles from private cars. Cui argues that high-frequency driving and heavy-load wear on vehicles like freight trucks and commercial passenger buses should be taxed accordingly, while private commuting cars should enjoy inclusive benefits.
The implementation of this policy should be gradual. Cui recommends piloting the reform in regions with high NEV penetration and mature markets, such as Hainan. This approach allows for the refinement of details and the accumulation of experience before a nationwide rollout, minimizing the impact of policy fluctuations on consumption.
Cui draws parallels to the 2008 reform that replaced road maintenance fees with taxes, which successfully boosted mass auto consumption during a period of economic downturn. He hopes that this new tax system will play a similar role, creating a win-win situation with no burden on residents, vibrant consumption, and guaranteed infrastructure funding.
The proposal comes at a time when China's BEV retail sales rose by 2.4% year-on-year in April, while PHEV sales plunged by 25.2%. This data highlights the urgency of the reform, as the market dynamics are shifting rapidly, and the traditional tax system is no longer adequate to support the evolving auto industry.
