Can the Exemption of the New Energy Vehicle Purchase Tax Policy Induce Technological Innovation of Automobile Companies?

Implementing industrial policies to develop the new energy vehicle industry and improve technological innovation related to new energy vehicles is essential for countries dealing with environmental pollution and climate change. This paper first examines the impact of a demand-side industry policy related to new energy vehicles on the technological innovation level of supply-side vehicle enterprises. Regarding the new energy vehicle purchase tax exemption policy implemented by the Chinese government in 2014 as a quasi-experiment, this paper constructs a multi-period difference-in-differences (DID) model to identify the impact of the demand-side preferential tax policy on the technological innovation level of vehicle enterprises. In our DID design, 178 enterprises are in the treatment group and 166 enterprises in the control group, with 3,440 balanced panel data of observations. The results show that this policy can significantly promote the technological innovation of new energy vehicle enterprises. This promotion effect is greater in magnitude in large-scale enterprises, high-tech enterprises, and enterprises producing passenger vehicles. Theoretically, we believe that the demand-side tax exemption policy mainly indirectly promotes the technological innovation level of automobile enterprises through the signal channel and profit channel.