China will extend its favorable tax policy for new energy vehicles to the end of 2020 to stimulate the innovation and development of electric cars, plug-in hybrids and fuel cell cars, the Ministry of Finance said on Dec 27.

The current purchase tax exemption, which is usually 10 percent of the vehicle’s retail price, will continue to apply, the ministry said in a statement issued jointly with the State Administration of Taxation, the Ministry of Industry and Information Technology, and the Ministry of Science and Technology.

The statement added that applications for vehicles not on the list can be filed as long as these meet particular requirements.

The continuation of the favorable tax policy comes as the current rebates, introduced in late 2014, are set to expire within the next few days.

Cui Dongshu, secretary-general of the China Passenger Car Association, said this is great news for the new energy vehicle sector.

“We have been calling for the continuation of policies in the sector. The move will improve new energy vehicles’ value for money and thus attract more customers to choose such cars.”

Thanks in part to the tax rebate and government subsidies, China has become the largest market for new energy vehicles, with 1.6 million on the nation’s roads by the end of November.

The subsidies, which are believed to play an even more important role in driving new energy vehicle sales, are reported to be slashed starting from 2018, although the authorities have not released any information so far.

The China Association of Automobile Manufacturers said total sales of new energy vehicles would reach 700,000 this year and 1 million in 2018.