After eleven years, the "trade-in for new" car program supported by central finance is set to once again become the main policy for stimulating consumption.
"The detailed policies and standards for the implementation of the trade-in for new program may be released in the first half of the year." On March 14th, according to information obtained from various sources, the details of this policy are still under discussion by relevant departments, and it is expected to be released in the first half of this year, with a possibility of being advanced to the second quarter if progress goes smoothly.
Just the day before, the State Council issued a notice on "Promoting Large-scale Equipment Updates and Trade-in Programs for Consumer Goods", which includes promoting trade-in programs for cars among other initiatives. The plan aims to increase policy support, address circulation bottlenecks, promote the gradual upgrading of cars, and organize nationwide promotions for trading in old cars for new ones, encouraging car manufacturers and sales companies to engage in promotional activities while guiding orderly competition in the industry.
"Every year, the industry conducts research on consumer behavior, such as whether they are first-time buyers or looking to replace or add to their existing vehicles. Since the second half of last year, we have been preparing to promote the trade-in for new program and have already submitted research reports and recommendations to higher authorities," said a practitioner from a relevant industry unit to Caijing Society. "Yesterday (March 13th), several ministries organized discussions among relevant agencies on the detailed implementation of the action plan."
The trade-in for new policy and its details have long been in the works.
"A while back, when officials from relevant departments came to conduct research, they also sought our opinions on some details of the trade-in policy," revealed a senior executive from an independent vehicle manufacturer.
At the macro level, encouraging and promoting trade-ins for consumer goods and boosting car consumption has become the main policy direction for the industry. During the second session of the Fourteenth National People's Congress economic theme press conference on March 6th, NDRC Director Zheng Zhajie introduced plans to promote trade-ins for durable consumer goods like cars. Minister of Commerce Wang Wentao emphasized during a Q&A session that one of the key tasks for consumption promotion this year is to promote trade-ins for cars, home appliances, and other consumer goods.
Five days earlier, the State Council executive meeting approved the "Promotion of Large-scale Equipment Updates and Trade-in Programs for Consumer Goods" plan, which includes actively promoting trade-ins for cars and home appliances to achieve a significant scale effect in product updates.
According to data from the Ministry of Commerce, as of 2023, China's car ownership reached 340 million vehicles, indicating significant demand and potential for upgrades. "Trade-in programs are likely to become the main means of stimulating car consumption this year," said Chen Chuan, director of the China Automobile Association's passenger car research office. This round of trade-in policy is expected to have two main features: coordinated efforts between central and local finance and a dual drive for traditional and new energy vehicles, with a greater emphasis on subsidies for new energy vehicles.
"At present, China has over 300 million vehicles, with a replacement cycle of approximately 6 to 8 years for traditional fuel vehicles and 3 to 5 years for new energy vehicles," analyzed Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association. "From a societal perspective, around 40% of vehicles are likely to be traded in for new ones." Considering the roughly 25 million new cars sold domestically last year, Lang Xuehong estimated that the market size for trade-ins could reach around 10 million vehicles.
Cui Dongshu, secretary-general of the China Passenger Car Association, stated that the current automobile market still faces challenges such as unstable consumer bases and weak confidence, making consumers highly anticipate the trade-in policy. "Therefore, the promotion of the trade-in policy should be accelerated to ensure that the automotive market enters a sustainable development track as soon as possible."
"The trade-in policy not only effectively saves consumers' costs for purchasing, using, and replacing cars, but also boosts the consumption of new energy vehicles, helps car manufacturers increase advanced capacity, improve production efficiency, and effectively accelerate the development of the new energy vehicle industry," expressed Lu Fang, CEO of LanTu Auto, echoing similar sentiments. On March 7th, LanTu announced a hefty investment of 1 billion CNY for subsidy policies covering its entire range of LanTu FREE, New LanTu Dream Home, and LanTu Chasing Light models.
Experts have noted that in the consumption field, the previous round of trade-in activities focused on the popularization of large durable goods, while this round shifts from addressing the question of "whether there is" to emphasizing "whether it's good."
The 2009 version of the trade-in policy had significant effects, driving automotive consumption to around 50 billion CNY that year.
On June 3rd, 2009, the General Office of the State Council issued a notice forwarding the implementation plan for promoting the expansion of domestic demand and encouraging trade-ins for automobiles and home appliances, aiming to further expand automobile and home appliance consumption, promote the expansion of domestic demand, and maintain stable and relatively fast economic development.
To this end, on top of the already allocated 1 billion CNY for scrapping old cars and updating subsidies, the central finance arranged an additional 4 billion CNY to subsidize certain vehicle models that met certain usage requirements and early scrapped "yellow label cars", with subsidy standards ranging from 3,000 to 6,000 CNY per vehicle.
On July 13th of the same year, the Ministry of Finance and the Ministry of Commerce jointly issued the "Implementation Rules for Automobile Trade-ins", which detailed provisions on subsidy scope and standards, application, review and issuance of scrapping subsidies, subsidy fund management, and supervision.
However, due to the relatively low subsidy standards, the implementation effect of this policy was not significant. According to data from the Ministry of Commerce, as of December 20th, 2009, a total of 12,101 trade-in cars were processed nationwide, with subsidy funds totaling 100.59 million CNY, and the policy driving new car consumption by around 1.8 billion CNY.
In response, the Ministry of Finance and the Ministry of Commerce significantly increased the subsidy standards. On December 31st, 2009, the "Notice on Adjusting the Subsidy Standards for Automobile Trade-ins" was issued, adjusting the subsidy standards to 5,000-18,000 CNY per vehicle. On January 18th, 2010, the Ministry of Finance and the Ministry of Commerce announced that the subsidy for trading in old cars could be enjoyed simultaneously with the vehicle purchase tax reduction policy.
In June 2010, the Ministry of Finance, the Ministry of Commerce, and three other ministries issued another document, extending the implementation period of the automobile trade-in policy from May 31st, 2010 to December 31st, 2010. The significantly increased subsidy amount, extended subsidy period, coupled with the halved purchase tax policy, greatly stimulated the car market that year. According to data from the Ministry of Commerce, from January to December 2010, a total of 459,000 vehicles were subsidized for trading in old for new, with subsidy funds totaling 6.41 billion CNY, driving new car consumption by 49.6 billion CNY. The average number of subsidized vehicles per day was about 12 times that of 2009.
In contrast, China's total annual automobile sales in 2010 were 18.06 million units, meaning that the year-long old-for-new policy boosted new car sales by 2.5%.
By 2020, the old-for-new car policy was once again put on the agenda. In October of that year, the National Development and Reform Commission stated that the next step would be to promote the transformation and upgrading of automobile and home appliance consumption, encourage the transition from restricting to guiding the use of cars, and encourage local governments to introduce policies to promote the replacement of old cars.
Unlike the central government subsidy policy introduced 11 years ago, this round of policy is mainly implemented by local governments and has been ongoing until now. Taking Shanghai as an example, in March of this year, the Shanghai Municipal Commission of Commerce announced a new round of subsidies for trading in fuel vehicles for new ones and policies for replacing new energy vehicles, with a maximum one-time subsidy of 10,000 CNY for purchasing a new car.
