Facing a survival battle, new energy vehicles encounter the dual challenge of range and energy consumption.

In October 2025, the Ministry of Industry and Information Technology, the Ministry of Finance, and the State Taxation Administration jointly announced new regulations for the exemption of vehicle purchase tax on new-energy vehicles from 2026 to 2027. These regulations redefine the rules of the rapidly growing new-energy automotive industry by raising the technological thresholds.

This adjustment isn’t a policy shift toward "completely eliminating subsidies and tax breaks." Instead, by raising the pure-electric range requirement for plug-in (including range-extended) hybrid passenger vehicles from the original 43 kilometers to 100 kilometers—more than doubling the threshold—it not only directly impacts consumers’ car-buying costs but also pushes automakers to a critical juncture of technological upgrades and product restructuring. As a result, the market viability of low-range plug-in hybrid models is being sharply squeezed.
At the corporate level, some automakers are facing short-term challenges as they adjust their vehicle lineups. Take BYD as an example: certain entry-level models designed for lower-tier markets have a pure-electric range of just 50 to 80 kilometers—precisely within the "red line" newly established by regulations. For instance, the entry-level version of the Qin PLUS DM-i (available with specific configurations and pricing inquiries) is equipped with a small-capacity battery pack, offering an estimated 55-kilometer all-electric range. However, this configuration will no longer qualify for the purchase tax exemption starting from 2026. Calculated at the statutory tax rate of 10%, a consumer purchasing an entry-level plug-in hybrid model priced at 120,000 yuan would end up bearing an additional 12,000 yuan in vehicle costs.

The impact of the new regulations isn’t limited to individual companies—it represents a structural adjustment that affects the entire plug-in hybrid market. Currently, plug-in hybrid models with a pure-electric range below 100 kilometers are primarily concentrated in the entry-level segment priced at 100,000 yuan and lower. Many of these models can only handle short-distance commuting in pure-electric mode, while real-world usage still relies mostly on gasoline power. As a result, they fail to deliver meaningful emissions reductions and have strayed from the original intent of China’s new energy policies. With the implementation of the new regulations, the phase-out process for these vehicles will be accelerated significantly.
For small and medium-sized automakers, the withdrawal of low-range plug-in hybrid models could trigger a survival crisis. Unlike leading companies such as BYD, these enterprises lack deep technological expertise and economies of scale. To boost pure-electric range to 100 kilometers, they would need to invest heavily in upgrading battery systems, reconfiguring chassis designs, and optimizing energy consumption—yet their products struggle to command premium pricing that could absorb these additional costs. Even for companies that manage to complete the necessary technological upgrades, phasing out low-range models will likely set off a ripple effect throughout the industry.
From the consumer perspective, in the short term, vehicle models that fail to meet the standards will be removed from the "Tax Exemption and Reduction Catalog," potentially narrowing the range of options available to buyers. However, in the long run, this move will steer the market toward higher-quality, longer-range products. Cui Dongshu, Secretary-General of the China Passenger Car Association, pointed out that stricter standards will encourage automakers to develop vehicles with superior performance, better addressing consumers' growing demand for extended driving ranges and reduced energy consumption. This, in turn, will drive industry and consumption upgrades simultaneously, creating a win-win scenario. He also noted that this policy adjustment is likely to spur a concentrated wave of pre-holiday car purchases before the end of the year, further boosted by the peak "Silver September, Golden October" season and automakers' year-end sales targets—factors that could help the automotive sector achieve modest growth in the fourth quarter.
The focus of technological upgrades for pure electric vehicle models is now squarely on energy consumption control. Under the new regulations, pure electric passenger vehicles must meet the corresponding standards outlined in "Energy Consumption Limits for Electric Vehicles—Part 1: Passenger Cars" (GB 36980.1—2025) regarding their electricity consumption per 100 kilometers. Additionally, models with a maximum design total mass exceeding 3,500 kg must adhere to the emission limits applicable to the 3,500-kg class (configuration & price inquiry). This adjustment compels automakers to ramp up investments in areas such as battery management system (BMS) optimization, lightweight vehicle design, and reductions in aerodynamic drag coefficients. The new rules link pure electric range directly to energy efficiency and battery performance, pushing manufacturers to further cut down energy consumption. Meanwhile, plug-in hybrid models are no longer just expected to "be able to use electricity"—they must also "use it efficiently." Specifically, under the charge-sustaining mode, passenger vehicles weighing less than 2,510 kg must achieve fuel consumption levels below 70% of their respective limit values, while in charge-depleting mode, their electricity consumption must stay within 140% of the prescribed limits. These multi-dimensional technical requirements will encourage companies to shift their focus from simply increasing range to comprehensively optimizing the entire vehicle system, thereby accelerating the iterative advancement of hybrid technologies.
Policy adjustments are shaping up to have a dual impact on consumers—bringing "short-term pain alongside long-term benefits." In terms of vehicle purchase costs, a "price gap" between new and older models is emerging in the short term, as 2025 marks the final window for buyers to opt for lower-range models. Meanwhile, some new-energy automakers are facing production capacity challenges, leading to delivery delays that extend into next year—and in response, these companies have introduced policies offering subsidies on purchase taxes. The implementation of these new regulations will serve as a crucial catalyst, propelling the new-energy vehicle industry to shift from being "policy-driven" to "technology-driven."

According to a rough estimate by CheShi RuiJian, although new models launched after 2026 will face cost pressures due to technological upgrades—specifically, the increased battery costs for plug-in hybrid vehicles could lead to price hikes of 3,000 to 8,000 yuan—research and development investments aimed at optimizing energy efficiency in pure-electric models may also push up their pricing. However, when combined with the purchase tax exemption, the actual cost of buying these vehicles could still remain more competitive. For instance, taking a long-range plug-in hybrid model priced at 150,000 yuan as an example, after benefiting from a 15,000-yuan reduction in purchase tax, the final out-of-pocket expense would be roughly equivalent to that of a non-tax-exempt vehicle priced at 120,000 yuan.
Industry insiders indicate that consumer decision-making for plug-in hybrid vehicles is also shifting: "range" is transitioning from a "bonus feature" to an "essential threshold," with the 120-200 km range emerging as the mainstream choice. Meanwhile, factors like energy consumption performance, battery warranties, and intelligent features are set to become key differentiators in competitive strategies. According to a survey by the China Passenger Car Association, in the first half of 2025, 62% of potential consumers will prioritize "pure electric range exceeding 100 km"—a 35-percentage-point increase compared to last year. For users in lower-tier markets with limited charging infrastructure, long-range plug-in hybrids—offering the convenience of "charging only once every few days"—better align with their daily usage patterns. In contrast, mid-to-high-end consumers are more likely to opt for models that combine extended range with advanced smart features. As a result, the market is witnessing a simultaneous trend of "demand segmentation and product upgrades."
Starting from 2026, the new regulations on exemption of purchase tax for new-energy vehicles serve as both a "touchstone" for the technological prowess of leading companies and a "period of consolidation" for their market positions. Although these firms may face short-term pressures related to costs and product iteration, in the long run, they will further strengthen their competitive edge by upgrading their product portfolios. Moreover, Cui Dongshu believes that the enhanced standards not only provide significant guidance for global automakers competing in China's market but also offer forward-looking direction for the future technological development of the global new-energy vehicle industry. For many low-range plug-in hybrid models and high-energy-consumption pure-electric vehicles, this policy adjustment marks the official start of an "elimination countdown," signaling a realignment of market shares: the low-end plug-in hybrid segment and the inefficient pure-electric segment will undergo redistribution. Meanwhile, smaller and medium-sized automakers lacking robust technological reserves may find themselves squeezed out during this industry reshuffle.

Translated from Sina Auto

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