Key facts
- China's electric vehicle (EV) boom is creating a shortfall in tax revenue used for road construction and maintenance.
- Domestic sales of gasoline cars decreased by 39% in May compared to the previous year.
- The market share of gasoline cars has fallen to a record low of 37.1%.
- Historically, taxes linked to gasoline consumption have funded China's road network.
China is experiencing an unintended consequence of its rapid electric vehicle (EV) adoption: a significant shortfall in the tax revenue crucial for building and maintaining its extensive road network. This issue is gaining urgency as sales of traditional gasoline-powered cars plummet.
In May, domestic sales of gasoline cars saw a 39% decrease compared to the same period last year, according to data from the China Passenger Car Association. This decline has pushed the market share of gasoline vehicles to a historic low of 37.1%.
For many years, China has relied on taxes generated from gasoline consumption to fund its vast road infrastructure. However, the increasing shift by consumers towards battery-powered EVs, which use little to no gasoline, is placing considerable strain on this traditional funding model.