As money runs low and authorities examine the presence of ‘zero-mileage’ secondhand automobiles, China's trade-in subsidy to increase sales of electric and fuel-efficient vehicles has been banned in major cities across at least six provinces.
Reports claim that the initiative, which provides customers up to 20,000 yuan toward the purchase of a newer model automobile and was supposed to run until the end of this year, has been suspended by cities in provinces including Guangdong, Henan, and Zhejiang.
They say that the practice of dealers and traders buying new automobiles in bulk, registering them to receive rebates, and then selling them on the used car market without ever having driven has increased financial strain and prompted government investigations.
Before continuing to encourage auto usage, regulators are researching measures to stop such behaviors and guarantee appropriate financial allocations.
A key pillar for the country's auto sales has been the cash-for-clunkers program, which is a component of a larger trade-in package designed to increase retail sales to support a faltering Chinese economy.
Data from the China Passenger automobile Association shows that almost 70 percent of personal automobile purchases in May used the trade-in subsidy, which is about consistent with the April number.
The program's halt exacerbates the already mounting difficulties automakers face in the biggest automobile market in the world.
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Following a lengthy price battle that attracted the attention of authorities, the business has found itself under increasing scrutiny. This includes the Ministry of Industry and Information Technology, which met with 17 major Chinese automakers in early June to discuss concerns like "zero-mileage" used automobiles alongside two other agencies.
After the previous policy officially ended at the end of 2024, China extended its auto trade-in subsidy program for 2025. Since the nation's EV subsidy expires in 2022, the program is the last incentive the central Chinese government provides to encourage the adoption of EVs. The trade-in program has been quite effective at increasing consumer demand for electric vehicles.
The 2024 eligibility requirements for car scrapping have been revised. In addition to the China 3 emission standard or lower criterion from the previous year, the subsidy is now available for ICE vehicles registered before June 2012 with a China 4 emission standard or below. In a similar vein, under the previous regulation, qualified EVs for scrapping had to be registered before to December 2018, as opposed to April 2018.
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Additionally, the program enables customers to sell their cars on the secondary market rather of having them scrapped. In this instance, the subsidy amounts are somewhat lowered, providing up to RMB13,000 (USD1,773) for a new ICE car and RMB15,000 (USD2,047) for a new EV.