In mid-June 2025, many places across the country announced the suspension of car replacement subsidy applications, which was like pressing the “pause button”, which suddenly cooled down the market that originally relied on subsidy stimulation.
Since May, many netizens have reported that local car subsidies have been suspended. According to incomplete statistics, up to now, more than a dozen cities in 5 provinces across the country have successively expressed the suspension of car replacement subsidies, including Zhengzhou and Luoyang in Henan, Xinjiang, Liaoning Shenyang, Chongqing and other provinces and cities. However, the latest response from the National Development and Reform Commission, the Ministry of Finance and other ministries and commissions is clear that the national trade-in subsidy policy for consumer goods in 2025 will last until December 31, and the remaining 138 billion yuan of central funds will be issued in batches in the third and fourth quarters. The previously mentioned subsidy “supply cut” is a normal connection window under the mechanism of quarterly batch allocation of central funds, and it was only reminded of “subsidy suspension” because the first batch of funds was exhausted.
The first two batches of 162 billion yuan have already achieved initial results in the automotive industry. According to data from the Passenger Car Association, the number of car trade-in applications nationwide reached 1.23 million in May, accounting for 70% of private car purchases. Taking Shenzhen as an example, from January to May, the national subsidy has directly leveraged about 36.7 billion yuan of automobile sales, involvedNew energyThe number of cars reached 70,000.
However, the connection window of normal funds and the wait-and-see of consumers still challenge the mid-year impulse plan of car companies, the inventory pressure of dealers is rising, and car companies and dealers are moving towards a crossroads.
There are multiple factors behind the “suspension”
The sudden suspension of subsidy policies is not without a trace. Government announcements in many places show that the rapid consumption of funds is a direct fuse. Taking Zhengzhou as an example, as an important automobile consumption town in the central region, on June 10, Zhengzhou City and Luoyang Municipal Bureau of Commerce took the lead in issuing an announcement announcing the imminent closure of the subsidy system. Among them, Zhengzhou clearly suspended the acceptance of applications at 0:00 on June 18, and Luoyang stopped accepting applications at 24:00 on June 12. Xuchang also made it clear that it would close the application entrance at 12 noon on June 13. According to the staff of the Zhengzhou Municipal Bureau of Commerce, the suspension stemmed from the rapid consumption of the first round of subsidy fund pools, and under the principle of “first-come, first-served”, the progress of fund allocation far exceeded expectations.
The phenomenon of consumer demand releasing and accelerating the use of funds is particularly prominent in third- and fourth-tier cities. The relevant person in charge of the Shenyang Municipal Bureau of Industry and Information Technology revealed that the city originally planned to issue subsidies of 150 million yuan throughout the year, but as of June 10, the actual number of applications had occupied 82% of the budget, and the remaining funds could only maintain the application demand for less than a month.
In addition, the phenomenon of some practitioners arbitrarily obtaining subsidies has also been noticed by the regulatory authorities. Relevant departments said, “We will guide local governments to further optimize and improve the subsidy distribution methods to ensure that policy implementation is more stable and orderly, and funds are used in a balanced manner until the end of the year.” “Shenyang, Chongqing and other places have also made it clear that they will launch the second phase of differentiated subsidy plans, and the future allocation of funds may be directedNew energy vehicles, the elimination of high-emission old cars and other key areas are tilted. For example, the new subsidy rules may strengthen vehicle traceability management, requiring scrapped old cars to provide complete recycling and dismantling certificates and cancellation registration records, and realize full-process monitoring through the national automobile circulation information management system.
According to the “Notice on Adjusting the Automobile Replacement Subsidy Policy” issued by the Shenyang Municipal Bureau of Industry and Information Technology, the new policy will set a tiered subsidy standard according to the energy efficiency level of the model, battery range and other indicators, and the subsidy amount for pure electric models with a range of more than 600 kilometers can be increased by up to 30%, while plug-in hybrid models need to meet the fuel consumption limit requirements to receive full subsidies. This “precision drip irrigation” subsidy mechanism aims to guide consumption to tilt towards high-tech products and avoid the waste of resources caused by “flood irrigation”.
This year’s national new energy vehicle purchase subsidy will be terminated on December 31, and the local suspension can be regarded as a “stress test” for policy decline, forcing the industry to actively adapt to the market. As emphasized in the “Key Points of Automotive Standardization in 2025”, the industry needs to build endogenous competitiveness through technical standard upgrades and carbon management throughout the life cycle, rather than relying solely on subsidized blood transfusions.
Market shocks affect the entire industry chain
Judging from the data, the “national subsidy” policy has a significant role in driving the auto market.
According to data from the Ministry of Commerce, as of May 31, the number of applications for car trade-in subsidies reached 4.12 million. According to the monthly rhythm, the number of car trade-in applications reached 1.23 million units in May, an increase of 13% from 1.09 million units in April. Compared with the retail scale of private household passenger cars in May, nearly 70% of private car buyers are beneficiaries of the trade-in policy.
Due to the “gap period” caused by the suspension of subsidies, the shock wave caused will quickly be transmitted to the consumer side, enterprise side and channel side, testing the anti-risk ability of the automobile industry in an all-round way. Consumers were the first to feel the rise in car purchase costs, and this wait-and-see sentiment directly led to further pressure on sales in the traditional off-season in June.
According to data from the Passenger Car Association, in the first eight days of June, although the retail sales of passenger cars in the country increased by 19% year-on-year, they fell by 12% month-on-month, and the number of dealers visiting stores fell by more than 30%. However, the market is also differentiated: consumers with sufficient budgets have turned to high-end models of more than 300,000 yuan that are not affected by subsidies, and the proportion of sales in this price range has risen to 28%, indicating that high-net-worth customers are less sensitive to price.
The challenges faced by car companies are more complex. Head brands such as BYD and Geely can still hedge the impact of reduced subsidies through supply chain cost reductions by virtue of their scale advantages, but second-tier brands are facing severe challenges, with their market share falling by 3.2% compared with the same period last year. What’s more severe is that the decline in subsidies has amplified the pressure on raw material costs.
Dealer inventory pressure has become another major concern of the industry. According to a survey by the China Automobile Dealers Association, the inventory cycle of some stores exceeds 2 months, which is much higher than the healthy 1.5-month standard of the industry. The circulation association also analyzed that in June, most parts of the country ushered in high temperatures and scorching heat, and the traditional off-season characteristics of the automotive industry appeared, and it is expected that the number of consumers entering stores may decrease.
Some experts believe that the local government has suspended the car trade-in subsidy, at present, because there are more people applying for subsidies, but there is a mismatch between the mechanism of funds issued in batches and the local declaration demand, and the subsidies for consumer goods such as home appliances also account for a large part of the national subsidy funds, “Local governments need to adjust, because according to convention, more cars are usually purchased in the second half of the year, and more subsidies are needed.” ”
Cui Dongshu, secretary-general of the Passenger Car Association, issued a document saying that the growth pressure of the high base of the automobile market in the future is still great, and it is expected that there will be long-term and strong successive policies, such as reducing and exempting individual tax for car buyers, promoting new energy vehicles to go to the countryside, optimizing the application for C7 economic electric vehicle driver’s licenses, exempting compliant pure electric vehicles with a range of less than 200 kilometers from car purchase tax, encouraging marriage and car purchases, and more improvement measures.
