Why are fuel tax receipts falling as EV sales surge in China?

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Fuel tax receipts are falling because more Chinese motorists are switching away from petrol-powered cars.

New-energy vehicles, including battery-electric and plug-in hybrid models, made up more than 60 per cent of new car sales in China last month. As that share rises, fewer drivers are buying petrol, and the taxes collected on petrol sales are declining.
Road repairs have long depended on petrol taxes
Most roads in China generate little direct income, so maintenance has traditionally been funded through taxes on petrol sales. The central government collects that revenue and allocates funds to local authorities responsible for repairs.
A long-standing funding model is losing its base
A 2021 study by researchers at China’s Transport Planning and Research Institute found that fuel taxes covered more than 80 per cent of annual maintenance costs for ordinary roads. That system worked for decades, but it depends on petrol consumption.
EV growth is reducing petrol use
China’s electric vehicle market has expanded quickly, helped by government support, technological advances and strong competition among domestic manufacturers. With more motorists choosing electric or plug-in hybrid vehicles, petrol demand is falling and fuel tax receipts are shrinking.
Heavier electric vehicles may add to road costs
Electric vehicles can also place more stress on roads because battery packs often make them heavier than comparable petrol models. That means maintenance needs can rise at the same time that fuel tax income is falling.

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Why are fuel tax receipts falling as EV sales surge in China?

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