Multiple provinces in China are reining in vehicle trade-in subsidies, according to Caixin, dealing a blow to auto sales and casting doubt on the durability of the national stimulus program. Many provinces have already reached or are approaching their subsidy quota due to high demand and are now curbing access.
The subsidies, in place since April 2024, contributed to nearly RMB 920 billion in car sales over the last year, a 10% boost, but there appears to be a diminishing return on the effect as the doubled subsidies handed out by the national government this year are also expected to bring about the same 10% increase in sales.
At the same time, with local government subsidy policies tightening, a recent China Automobile Dealers Association (CADA) survey showed that over 75% of dealerships reported a significant drop in foot traffic and sales. Nearly 30% of stores cited sales declines exceeding 15%, and over 40% reported drops of more than 10%.
The boost in sales will have been welcome for Chinese car makers, but it appears that it will have a short-term effect on the market, and there will still be something of a Darwinian showdown in the relatively near future where only the biggest, for example BYD, survive.