Recently, Chongqing, Zhengzhou, Luoyang, Shenyang and other places have successively suspended the car replacement subsidy business, which has aroused widespread concern among consumers and the industry. Some consumers are worried about whether the subsidy policy will be “broken”, and some people even associate the suspension of subsidies with chaos such as “zero-kilometer second-hand cars”, suspecting that it is stopped to rectify industry problems.
However, this is not the case.Gasso Automotive Research InstituteAnalysts pointed out that the reason for the suspension of subsidies in some regions is that the current round of subsidies has been exhausted more than expected, rather than the termination of the policy. It is reported that there will still be 138 billion yuan of central funds to be issued in 2025.
There are still 138 billion subsidies to be delivered
In some areas, the amount of subsidy funds exceeded expectations, resulting in the early exhaustion of the quota, and the acceptance of subsidies could only be suspended.
According to incomplete statistics from Gasgoo, more than 10 provinces and cities have suspended the acceptance of car trade-in subsidies. For example, Zhengzhou and Luoyang in Henan Province both suspended applications for car replacement and renewal subsidies in early June. Chongqing, Shenyang, Xinjiang, Xuchang and other places also announced phased adjustments in the same month.
The Guangxi Department of Commerce also made it clear that subsidy activities such as car replacement and renewal will be suspended from June 20, but the scrapping and renewal subsidy will continue to be implemented. These announcements emphasize that suspension is not the same as termination, and subsequent policy adjustments will be notified separately through official channels.
For consumers, the suspension of subsidies has a short-term impact. During the implementation of the policy, it will be replacedNew energyCars can receive a subsidy of up to 20,000 yuan, fuel vehicles can receive up to 15,000 yuan, and the central and local governments will jointly bear the subsidy funds in a ratio of 9:1. This discount significantly reduces the cost of buying a car, stimulates consumer enthusiasm, and then maintains the steady growth of the domestic auto market, reaching an annual sales of 30 million units.
However, some consumers did not understand the policy rhythm and mistakenly thought that the subsidy was completely canceled, delaying their car purchase plans. Some people also link the suspension to the chaos of “zero-kilometer second-hand cars”, believing that it is a signal for the state to rectify the market. However, some analysts believe that the suspension of subsidy policies in many places has little to do with this, mainly because of the exhaustion of funds in this round.
At the national level, the trade-in policy has not been turned, and support has not been cut, and the next round of subsidies will be launched soon.
In the latest notice, the Ministry of Commerce made it clear that it will continue to promote trade-in related work in July and organize the development of “1,000 counties and 10,000 towns in 2025.”New energy vehiclesConsumption Season” activities to coordinate car renewal, trade-in and green travel plans in various places.
According to public information from the National Development and Reform Commission, the state will allocate a total of 300 billion yuan to support the trade-in of consumer goods in 2025. Among them, the first and second batches of funds of 162 billion yuan were used to promote the launch of replacement subsidies in the first half of the year.
From the perspective of policy setting, the automobile trade-in subsidy funds are managed and distributed in quarterly batches and phases to ensure that all localities are orderly in combination with the actual use progress and market performance.
A total of 162 billion yuan of central funds in the first and second rounds of 2025 have been allocated to various regions, but due to the hot application, some regions have exhausted funds ahead of schedule, rather than a signal of policy failure or chaotic implementation. The Chongqing Municipal Commission of Commerce also explained, “Since the beginning of this year, due to the strong policy publicity and the city’s efforts to expand the implementation of the consumer goods trade-in subsidy policy, the enthusiasm of citizens to participate is high, resulting in the first phase of subsidy funds will be used up.” ”
However, there are still many regions across the country with sufficient subsidy funds, and the policy continues to be implemented. For example, Xi’an, Shaanxi Province, took advantage of the June 1st and Dragon Boat Festivals to continue to carry out trade-in of consumer goods, and issued subsidies for new energy vehicle purchases and online consumption. During the Dragon Boat Festival, Xi’an Automobile applied for a total of 1,990 new vehicles for trade-in, with a subsidy of 31 million yuan.
As of May 31, 2025, data from the Ministry of Commerce shows that the number of applications for car trade-in subsidies nationwide has reached 4.12 million, and the number of applications in May alone was as high as 1.23 million units. According to the estimates of the Passenger Car Association, 70% of private car buyers in May were direct beneficiaries of the trade-in policy.
Under the incentive of high-intensity policies, consumers’ willingness to change cars has increased significantly, and the passenger flow of the dealership side has also rebounded sharply in the short term. It can be said that the two rounds of subsidies in the first half of the year have injected substantial growth momentum into the auto market.
In the second half of the year, the remaining 138 billion yuan of central funds will be issued in batches in the third and fourth quarters, and will cooperate with the “2025 New Energy Vehicle Consumption Season of Thousands of Counties and Ten Towns” to coordinate measures to promote consumption such as car trade-in. It is foreseeable that the traditional off-season of car purchases in July and August may not be weak, and the traditional peak sales season of “Golden Nine and Silver Ten” may be more prosperous.
The Chongqing Municipal Commission of Commerce revealed in June that the second phase of the trade-in subsidy policy is being drafted, which is expected to be introduced in early June, and local matching funds will also follow. This arrangement provides clear expectations for consumers and car companies, alleviates market unease, and is expected to further stimulate automobile consumption potential.
Some industry insiders pointed out that instead of worrying about policy withdrawal, it is better to pay attention to the optimization of the subsidy “continuity mechanism” – from policy continuity, fund allocation efficiency to local system operation capacity, are important factors that determine the effect of subsequent subsidies.
From this perspective, the subsidy is only a temporary “rest”, and will soon be “on the road again”.
It is expected to drive sales of more than 2 million units
With the continuous promotion of the trade-in subsidy policy, the market is feeding back a clear positive effect. The Gasgoo Automotive Research Institute predicts that the policy is expected to drive 2 million ~ 2.5 million vehicles in 2025Car sales。 This optimistic expectation is supported by multiple factors, including the volume of funds, policy rhythm, market response, industrial linkage, etc.
First of all, the continuous increase in subsidies and coverage is the direct driver of sales growth. At the same time, the cycle is long, starting in January this year, and officially launched in April last year.
In 2025, the state will arrange a total of 300 billion yuan of trade-in subsidy funds, which far exceeds the 150 billion yuan in 2024, and the central and local governments will share it in a ratio of 9:1 (8.5:1.5 in the east, 9:1:1 in the center, and 9.5:0.5 in the west), which greatly enhances the ability to implement the policy.
Specific to the automotive industry, compared with the subsidy policy mainly for vehicles in China III and below in 2024, this expansion has significantly released the demand for renewal of existing vehicles. Everbright Securities pointed out that this year’s trade-in policy will include China IV emission standard vehicles in the scope of subsidies, covering nearly 19 million potential renewal vehicles, and the maximum subsidy amount for bicycles has been increased to 20,000 yuan, which is much higher than most local subsidies in the past, stimulating the activity of the replacement market.
The expansion of capital volume and coverage is the primary reason for the policy to form a pulling effect of “quantitative change to qualitative change”.
Secondly, from the perspective of effect, last year’s subsidies have provided a strong reference for this year’s trend. According to data from the Ministry of Commerce, in 2024, more than 2.9 million vehicles will be scrapped and renewed, and more than 3.7 million will be replaced, and subsidies will drive sales of more than 920 billion yuan. This shows that the subsidy policy has effectively lowered the threshold for car purchases, especially for budget-sensitive consumer groups.
In 2025, the policy will continue and be optimized, and the amount of bicycle subsidies will be similar to last year, and new subsidies for urban buses and power battery renewal will be added, with an average subsidy of 60,000 yuan per vehicle increased from 60,000 yuan to 80,000 yuan, further expanding the coverage of policy dividends.
According to Goldman Sachs estimates, trade-ins in 2024 directly contributed to 1.8 million new sales, accounting for about 5.7% of total annual sales. The conversion rate of purchase decisions promoted by this policy is very considerable, and according to the data of China Automobile Coordination, about one-third of car buyers made it clear that they made the decision to change their cars because of the subsidy policy. Without the support of car subsidies, Goldman Sachs believes that overall passenger car sales may decline last year.
On June 20, the relevant person in charge of the Ministry of Commerce said that as of now, the sales of consumer goods trade-in policies have exceeded the total of 1.3 trillion yuan in 2024.
At the same time, the automotive industry is currently in an unprecedented period of high competitive pressure, and the “involution” between car companies has become another “thrust”. Especially in the new energy track, independent brands focus on launching new models at low and medium prices, superimposing traditional car companies to develop intelligent products, and the market competition is far more fierce than in previous years.
Since the beginning of this year, brands such as BYD, Geely, and Changan have been launched one after another, and at the same time, they have been equipped with high cash discounts, financial support, replacement benefits and other means, effectively amplifying consumers’ car purchase income in addition to subsidies. For example, some car companies set off a wave of “limited-time fixed price” promotions in the first half of the year, making the price war penetrate almost all price segments. According to the data of the Passenger Car Association, in April this year, the overall preferential range of the passenger car market reached 29,500 yuan, and the average transaction price was only 156,000 yuan.
These concession methods are essentially “pushing” enterprises in cooperation with policies, rather than unilaterally reducing prices. It is reported that although many terminal discounts are marked as “enterprise subsidies” and “limited-time activities” on the price plate, they actually include policy support such as national subsidies and local subsidies. This “combination punch” transforms subsidies into visible benefits, which greatly stimulates consumer enthusiasm.
According to data from Shenzhen in early June, since the beginning of this year, more than 60,000 cars have been sold through trade-in, with a sales amount of 15 billion yuan.
Judging from the data released by the Passenger Car Association, the retail sales of passenger cars in May increased by 13.7% year-on-year to 1.94 million units. This is inseparable from the promotion of the trade-in policy. In June, although sales slowed down due to factors such as the suspension of subsidies in some regions and the rise in wait-and-see sentiment, retail sales in the first 22 days still increased by 24% year-on-year.
In this regard, the Passenger Association believes that due to the phased shortage of subsidy funds in some areas, dealers have increased consumer publicity in order to seize the opportunity of trade-in, superimposed on the “fixed price” of some car companies to form a supply and demand relationship in the short term, and the demand for self-driving car purchases in the summer has gradually increased, which has jointly driven the growth of sales.
The dual help of policy dividends and promotional activities has made dealers more optimistic about the trend of the auto market. According to the statistics of the China Automobile Dealers Association, the average inventory days of dealers across the country have reached 54 days, and the inventory pressure has increased, but most dealers have not shown a negative attitude.
Especially in the context of the current exchange demand gradually becoming the main consumer force, the policy superimposed on the market price advantage makes the explosive power of consumption in the additional purchase market stronger. According to the “2025 Automobile Trade-in Consumption Insight Report” jointly released by China Automobile Data and Chedi, nearly 2.8 million cars were traded in in the first quarter of 2025, accounting for about 40% of the total. Some analysts believe that automobile consumption is shifting from “new volume” to “structural renewal”, and the policy is aimed at the core demands of this group.
Based on all factors, the subsidy policy should be able to drive sales of more than 2 million units. On the one hand, the policy is highly sustainable and the rhythm is clear, and the quarterly allocation method not only ensures the flexibility of local operations, but also facilitates the adjustment of policy design. On the other hand, the market has shown strong policy response elasticity in real feedback, coupled with the flexible marketing of “supporting operations” between car companies, so that subsidy dividends are quickly digested and converted into sales.
However, it will still take a certain amount of time for the new wave of funds to be approved, and the Passenger Branch believes that consumers’ wait-and-see sentiment may intensify during this period, which may make the consumption potential of the auto market in the third quarter consumed in advance.
We cannot rely too heavily on subsidies
As an important starting point for boosting automobile consumption in the short term, subsidy policies have been proven to be effective in past practice, but for the long-term healthy development of the auto market, how to gradually reduce dependence on subsidies and achieve endogenous driving has become an important issue that cannot be avoided at the industry and policy level. Especially under the superficial prosperity of subsidies-driven sales, some deep-seated structural problems have gradually been exposed, which urgently need to attract widespread attention from the industry.
Some analysts pointed out that although the current subsidy model can significantly stimulate sales growth in a short period of time, there are also hidden concerns about overdrafting future demand and exacerbating market volatility. The consumption potential released during the policy window every year makes the difference between the traditional peak season and the off-season less obvious.
Outside the subsidy cycle, the market is prone to fall into a passive state of “no policy, no consumption”. Once this dependence is formed, enterprises may deviate from long-term logic when formulating product strategies and marketing plans, and pay more attention to how to “dock policies”, thus objectively weakening the industry’s ability to self-repair and evolve.
In addition to interfering with the rhythm of demand, the irrational competition brought about by subsidies is also worthy of vigilance. At present, the competition in the auto market has entered the stage of stock game, and the price war between car companies is intensifying. In order to seize market share, some car companies even lowered the price of compact cars to 30,000 yuan, causing chaos in the price system.
In these promotional activities, manufacturer discounts are often superimposed with policy subsidies to form a new bottom line in consumer cognition. But it is undeniable that this price reduction competition has squeezed the profit margins of car companies and dealers and damaged the long-term stability of the industry. Once subsidies decline and prices recover, consumers will face a large psychological gap, which is not conducive to the continuation of consumer confidence.
The implementation of subsidy policies has given rise to a series of industry chaos and undermined the normal market order.
The most typical is the problem of “zero-kilometer second-hand cars”, that is, some car dealers register and transfer new cars to second-hand cars. These vehicles have re-entered the market as “quasi-new cars” with basically zero mileage, which not only squeezes the normal new car sales space, but also disrupts the price system and harms the interests of consumers.
In addition to the problem of transaction links, the imbalance between the upstream and downstream of the industrial chain also needs to be solved urgently. At present, many leading OEMs are accelerating the launch and expansion of new products under the subsidy policy, but extending the settlement cycle with upstream and downstream partners, forming a large capital occupancy.
According to the proposal issued by the Henan Automobile Industry Chamber of Commerce, some dealers in the province are currently facing an operating rebate period of more than 90 days or even 180 days, which seriously squeezes operating cash flow. Some dealers reported that some models were asked to sell at 120,000 yuan at a purchase price of 150,000 yuan, and the price inversion led to “selling one car and losing one”, and the pressure on capital turnover was huge.
The chamber of commerce called on OEMs to shorten the rebate cycle, suspend the depot press, and prohibit price inversion to maintain the basic living space of the channel.
Subsidy dependence also masks the industry’s lack of product strength and innovation. Some automotive analysts have said that some car companies are overly dependent on policy dividends and ignore investment in technology research and development and brand differentiation, resulting in prominent product homogenization problems. At present, some car companies still tend to attract the market through low-price competition, rather than relying on technological breakthroughs to establish core competitiveness.
A number of automobile business associations have issued an appeal for this, emphasizing that the industry needs to get rid of subsidy dependence and build a healthy development ecology. The China Association of Automobile Manufacturers calls on car companies to maintain market order through standardized competition, oppose price wars without bottom-lines, and advocate driving industry development with technological innovation and high-quality services.
At the regulatory level, the state has noticed the structural problems in the industry and has begun to promote a number of regulatory measures. In order to crack down on “zero-kilometer second-hand cars” and other subsidy behaviors, many places have successively upgraded the subsidy system review mechanism. Combined with multiple sources, Jiangsu Province has switched to offline quota management, Guangdong Province has added identity verification links, and Shandong Province and Zhejiang Province have implemented the dual checkpoint of “municipal review + provincial review” to extend the review cycle to plug policy loopholes.
The National Development and Reform Commission emphasized that it is necessary to strengthen industry self-discipline and guide new energy, automobile, and photovoltaic enterprises to pay attention to technology research and development. It is also necessary to strengthen market supervision and crack down on the chaos of inferior quality and low-priced markets.
In March, the State Council issued the revised Regulations on Guaranteeing Payment of Small and Medium-sized Enterprises (hereinafter referred to as the “Regulations”), emphasizing that large enterprises should pay within 60 days from the date of delivery when purchasing goods, projects and services from small and medium-sized enterprises. This regulation will come into full force on June 1, 2025. At present, more than 17 car companies have collectively committed to unify the payment period of suppliers to 60 days.
More importantly, the policy direction is shifting from simply stimulating sales to guiding technological innovation. The “Key Points for Automobile Standardization in 2025” issued by the Ministry of Industry and Information Technology aims to accelerate through technical standard upgrades and full life cycle carbon managementIntelligent networkingThe development of automotive functional safety and battery management system standards promotes the transformation of the industry to green and intelligent.
Some people believe that a single financial subsidy model should be transformed to optimize the multi-dimensional consumption environment and promote automobile consumption from “phased stimulus” to “long-term structural upgrading”.
Industry parties are also calling for more long-term and structural support policies. For example, measures such as reducing individual income tax, supporting new energy vehicles to go to the countryside, improving charging facilities, and promoting the circulation of second-hand new energy vehicles are more sustainable and systematic than short-term cash subsidies.
At present, China’s automobile industry is moving from the “speed era” to the “value era”. When the policy gradually returns to normal, enterprises with comprehensive capabilities such as technological innovation, brand building, and service system can cross the cycle and gain a firm foothold in the new round of competition.
For the entire industry, instead of chasing “short-term sales dividends”, it is better to focus on the “long-term development logic”, which will be the fundamental path for the healthy and sustainable development of China’s automobile industry.
