China’s EV boom is leaving a growing hole in road repair funding

BEIJING, June 22 — China’s transition to electric vehicles has become one of the country’s most celebrated industrial achievements.

But beneath the surge in sales lies a quieter problem: the rapid shift away from petrol-powered cars is weakening a key source of funding for the roads those vehicles travel on, according to South China Morning Post.

The challenge is emerging as local governments grapple with maintaining one of the world’s largest road networks while facing mounting fiscal pressure.

New-energy vehicles, including battery-electric and plug-in hybrid models, accounted for more than 60 per cent of new car sales in China last month, data from the China Passenger Car Association showed.

The milestone reflects years of government support, technological advances and intense competition among domestic manufacturers, helping China establish itself as the world’s largest electric vehicle market.

Yet the transition is also exposing the limits of a funding model built around petrol consumption.

Most roads in China generate little direct income. Instead, maintenance has traditionally been financed through taxes on petrol sales, with the central government collecting the revenue and allocating funds to local authorities responsible for repairs.

That system has proved effective for decades. 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.

The equation is now changing.

As more motorists abandon petrol-powered vehicles, fuel tax receipts are declining. At the same time, demand for road maintenance is rising as the country’s transport infrastructure ages.

Electric vehicles may be adding to those costs. Their battery packs often make them heavier than comparable petrol models, placing greater stress on road surfaces over time and increasing the need for repairs.

The result is a widening gap between the money available for road maintenance and the cost of preserving the network, placing additional strain on local governments already facing broader budgetary pressures.

The issue highlights an unintended consequence of China’s rapid embrace of electric mobility.

Policies designed to reduce emissions and strengthen the country’s automotive industry have accelerated the move away from fossil fuels, but they have also begun to erode the tax base that has long supported transport infrastructure.

China is not alone in confronting the problem.

Governments elsewhere are also considering how to replace fuel-tax revenue as electric vehicles become more common, with proposals ranging from mileage-based road charges to revised vehicle registration fees.

For China, however, the pace of EV adoption and the scale of its road network mean the question carries particular urgency. The country’s success in electrifying transport is increasingly forcing policymakers to reconsider how the infrastructure underpinning that transition should be financed, South China Morning Post reported.