- China is renewing its auto trade-in subsidies in 2025, fine-tuning the details.
- Analysts expect the subsidies to boost demand by 3 million units for the full year 2025 and support double-digit growth in the second and third quarters.
China is continuing to offer car trade-in subsidies in 2025, allaying a concern that auto consumption could suffer after the previous policy expired at the end of 2024.
A document released today by China's National Development and Reform Commission (NDRC) said the country is continuing its consumer goods trade-in support policy in 2025.
Individual consumers who scrap their old vehicles and buy new ones will be able to receive a subsidy of up to RMB 20,000 ($2,730) per vehicle if they buy a new energy vehicle (NEV) model, or RMB 15,000 per vehicle if they buy a gas vehicle with a displacement of 2.0 liters or less.
The subsidy amount is the same as the updated policy released in July 2024, but the latest policy expands the range of old vehicles that can be used for scrapping.
Under the latest policy, consumers can apply for the subsidy when they scrap their China 4 emission standard vehicles and buy new ones. For comparison, last year's policy required eligible vehicles to be China 3 and below emission standards.
These old gasoline vehicles need to have been registered on or before June 30, 2012. And for older NEVs, the registration date needs to be December 31, 2018 and before.
Last year's policy required that the old gasoline vehicles being scrapped be registered by June 30, 2011, while the old NEVs needed to be registered by April 30, 2018.
For individual consumers who sell their old passenger cars and buy new ones, they can receive a subsidy of no more than RMB 15,000 per unit for NEVs, or RMB 13,000 for fuel vehicles.
Local governments will need to work out implementation details for the subsidies for the purchase of new cars by trade-in, according to the document released by the NDRC today.
“We regard the above-mentioned renewal of the vehicle trade-in subsidy policy as the Chinese government's latest effort to boost overall consumption, the macro economy, and NEV development,” Deutsche Bank analyst Wang Bin's team said in a research note today.
The team expects the auto trade-in subsidy program to drive full-year demand growth of 3 million units in 2025 and support double-digit growth in the second and third quarters.
They also expect some front-loaded demand in the fourth quarter, after which the NEV purchase tax rate will rise from the current 0 percent to 5 percent in 2026, which could lead to about 500,000 units of front-loaded demand.
Wang's team forecasts full-year 2025 wholesale passenger vehicle sales in China to grow 11 percent year-on-year to 30 million units.
With the same amount of subsidies across different price segments, Deutsche Bank expects lower-priced vehicles, especially lower-priced NEVs, to benefit more as they have a higher subsidy-to-price ratio.
“Among the stocks we cover, BYD would benefit the most, followed by Geely and Leapmotor,” the team said.
In 2024, more than 6.5 million applications were made to buy new cars by scrapping old cars as well as trading them in, an NDRC spokesperson said at a media briefing today.
Prior to today's announcement, EV makers including Nio (NYSE: NIO) and Li Auto (NASDAQ: LI) unveiled measures to smooth out the potential impact of the expiration of the trade-in subsidies.
($1 = RMB 7.3317)
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