In order to reduce carbon emissions and urban smog, the Chinese government has instituted a number of policies to promote the diffusion of new energy vehicles (NEVs), achieving remarkable results. This paper aims to quantify the effectiveness of various policies. After reviewing and quantifying the policies directly related to the sales and driving of NEVs in the past five years, we established a multivariate co-integration model and an error correction model to analyse the long- and short-term effects of these policies. The results demonstrate positive co-integration for the relationship between the NEV market share and the NEV purchase subsidy, tax exemption, the policy of restricting internal combustion engine vehicle (ICEV) purchase, and the abolishment of traffic restrictions for NEVs. China's unique policy of restricting ICEVs has in fact promoted NEV sales by adjusting the supply and demand to influence the consumers' choices. Finally, we found technology to still be a bottleneck factor in the NEV industry, and technological progress's effect on NEV diffusion is greater than the economic subsidy policy. Therefore, this study suggests that the funds being made available from the gradual reduction of the purchase subsidy should be transferred to research and development. •China's recent incentive policies to promote the NEV industry have been effective.•China's unique restrictions on vehicle purchases have a significantly positive impact on NEV diffusion.•The impact of different method for vehicle purchasing restriction on NEV sales is different.•The resources gained from reducing subsidies should be used to encourage the R&D of technologies.