news

A new round of car trade-in has officially started. On August 16, the Ministry of Commerce and seven other departments jointly issued the "Notice on Further Improving the Work of Car Trade-in" (hereinafter referred to as the "Notice"), which clearly stated that the subsidy standard for scrapping and updating cars will be increased, the central government's financial support will be increased, supervision and management will be strengthened, and the review and payment supervision process for scrapping and updating cars will be optimized, so as to increase efforts to promote car trade-in. What are the changes in the car trade-in policy? How to better meet the diverse consumption needs of the people?

Optimization details

Greater financial support

"On the one hand, the "Notice" is the implementation of the "Several Measures to Further Support Large-Scale Equipment Renewal and Consumer Goods Trade-in", and on the other hand, it is also a further optimization of the relevant provisions of the "Implementation Rules for Car Trade-in Subsidies." Wang Du, assistant to the president of the China Automobile Dealers Association, said in an interview with reporters that the car trade-in program has received widespread attention since its launch and has made a good start. At the same time, there are also some problems and matters to be optimized. This "Notice" has optimized and adjusted the relevant content.

On July 25, "Several Measures on Further Supporting Large-Scale Equipment Updates and Trade-ins for Old Consumer Goods" was issued, which clearly stated that the subsidy standard for scrapping and updating should be raised. At the same time, it proposed to coordinate the arrangement of about 300 billion yuan of ultra-long-term special government bond funds to further support large-scale equipment updates and trade-ins for old consumer goods.

Wang Du believes that the implementation of the "Notice on Several Measures to Further Support Large-Scale Equipment Renewal and Consumer Goods Trade-in" is reflected in many aspects. Among them, the most concerned by consumers is the clarification of the increased subsidy standards.

The Notice mentioned that for individual consumers who meet the requirements of the Implementation Rules for Subsidies for Old-for-New Vehicles and scrap their old cars and buy new ones, the subsidy standard will be increased from 10,000 yuan for new energy passenger cars and 7,000 yuan for fuel passenger cars to 20,000 yuan and 15,000 yuan respectively. It is worth mentioning that all eligible subsidy applications submitted between April 24, 2024 and January 10, 2025 can be subsidized according to this standard. Among them, for subsidy applications that have been issued according to the previous standards, local governments will make up the difference according to this standard.

After this adjustment, the subsidy standard for new energy passenger cars doubled, while the subsidy amount for fuel passenger cars more than doubled. In Wang Du's view, the moderate increase in the subsidy ratio for fuel vehicles also reflects the strategy of "stabilizing traditional fuel vehicles."

At the same time, the Notice also improves the efficiency of old-for-new by simplifying the process and adjusting the funding support method; reasonably expands the scope of funding support from passenger cars to commercial vehicles, and from scrapping and updating to replacement and updating. In addition, it is clarified that the subsidy funds for scrapping and updating of automobiles will be shared by the central and local governments in accordance with the principle of 9:1 in general, and the specific sharing ratio will be determined by region.

Xu Haidong, deputy chief engineer of the China Association of Automobile Manufacturers, said in an interview with reporters, "The Notice simplifies various procedures, adjusts the funding support method, and includes replacement and renewal. In other words, local governments can formulate corresponding policies based on local conditions, including the use of funds. We look forward to more people-friendly policies for replacement and renewal in various places."

Another thing that has attracted widespread attention is that the state directly arranges ultra-long-term special treasury bond funds to local governments to support local governments in carrying out replacement and renewal independently.

"It is expected that places that have already issued replacement and renewal policies in the early stage will be able to significantly increase subsidy standards with the support of ultra-long-term special government bonds, and further expand the results of the old car new exchange." Wang Du cited Qinghai Province as an example. In addition to the car scrapping and renewal policy, the place also introduced relevant car replacement and renewal subsidies and new car purchase subsidy policies with the support of ultra-long-term special government bonds.

According to the relevant policies of Qinghai Province, in terms of automobile replacement and renewal subsidies, consumers who sell their second-hand cars and purchase fuel passenger cars with a displacement of 2.0 liters or less with a price of RMB 100,000 (inclusive) or more in Qinghai Province will receive a subsidy of RMB 15,000, and those who purchase new energy passenger cars with a price of RMB 100,000 (inclusive) or more will receive a subsidy of RMB 20,000. In terms of the subsidy policy for purchasing new cars, individual consumers (including fuel vehicles and new energy vehicles) who purchase new passenger cars in Qinghai Province will receive three subsidies based on the purchase price. A subsidy of RMB 3,000 will be given for a purchase price of RMB 50,000 (inclusive) or more, a subsidy of RMB 4,000 will be given for a purchase price of RMB 100,000 (inclusive) or more, and a subsidy of RMB 5,000 will be given for a purchase price of RMB 200,000 (inclusive) or more. Each consumer can enjoy a maximum of one subsidy.

Using government to promote demand

Deeply release consumption potential

After the new version of the car trade-in policy was introduced, many consumers have shown interest in replacing their vehicles. In the FAW-Volkswagen showroom of Liangxiang Wanda Industry and Trade Co., Ltd. in Fangshan District, Beijing, the reporter still saw many consumers asking about subsidies even on weekdays.

Mr. Zhou, who came to see the car, told reporters that he had the idea of ​​changing his car when he saw the old-for-new subsidy policy in April this year. "I've been driving my old car for nearly ten years. I test-drove a few cars a while ago and I feel that the new cars are all very good. The new policy has doubled the subsidy, so I plan to place an order in the next few days."

At present, some car companies are also launching new marketing measures based on the old-for-new policy. Beijing Auto, Chery Automobile, BYD, SAIC Volkswagen, FAW Hongqi, Great Wall Motors, Changan Ford and many other car companies have further increased subsidies on the basis of the old-for-new policy. For example, FAW Hongqi launched the "lowest price, lowest price" limited-time car purchase rights. Users who purchase cars during the event can enjoy up to 50,000 yuan replacement subsidies, up to 5,000 yuan insurance subsidies, and 2 years of zero interest on top of the national subsidy of up to 20,000 yuan. An insider of China FAW told reporters that its relevant departments are stepping up research on corporate subsidy measures based on the new policy, which are expected to be launched at the end of this month.

As a country with a large population, China has a huge market for durable goods such as automobiles, which contains huge market potential for replacement. Data shows that by the end of 2023, China's civilian car ownership will reach 336 million. The latest statistics released by the Ministry of Public Security show that as of the end of June this year, the national motor vehicle ownership reached 440 million, including 345 million cars and 24.72 million new energy vehicles.

According to the China Association of Automobile Manufacturers, China's total automobile sales will exceed 31 million in 2024. According to the National Information Center, the proportion of replacement demand in China's automobile market will be 44% of the total demand in 2024, and it is expected to increase to about 48% by 2025.

Although there is demand and market, some practical factors also need to be considered.

Wang Du frankly said that it should be noted that at present, domestic consumers are more cautious and rational in their consumption behavior, which is more prominent in second- and third-tier cities. As the prices of used cars in the market generally fall, many car owners believe that it is more economical to continue using old cars. In some areas, it costs 10,000 to 90,000 yuan to replace an economical and affordable vehicle. In some areas, car owners are even willing to continue driving vehicles worth less than 10,000 yuan.

"This phenomenon also leads to the fact that although the subsidy amount of the old-for-new policy is relatively high, it is not enough to have a sufficient impact on promoting consumer demand, which further affects the effectiveness of the policy implementation." Wang Du said.

The new policy has increased the amount of subsidies, which to some extent can stimulate the desire of some consumers who need to replace their cars. Xu Haidong told reporters, "In the past four or five years, domestic automobile consumption has not actually grown significantly, and demand is relatively weak. In this case, promoting the replacement of old cars with new ones and the renewal of scrapped cars at the national level can well stimulate market demand."

"In reality, the previous car trade-in policy still has certain limitations, because 'people with scrapped car quotas' and 'people who are willing to replace cars' cannot be directly equated." Xu Haidong further explained that the vehicles that are scrapped and updated now are all vehicles that have been in use for 15 years and meet the National III emission standards, which are basically more than ten years old. Most of these cars are concentrated in fourth-tier, fifth-tier, and sixth-tier cities, as well as some rural areas. Many of them do not have the ability to buy new cars, and even if they change cars, they are likely to buy used cars. Of course, there are also some consumers who have the ability to buy new cars, but they are hesitant between buying new cars and buying used cars.

"The current policy is to encourage this group of consumers to buy new cars and scrap the vehicles they already have. It should be noted that there are currently no regulations on mandatory scrapping of private passenger cars in the country. A substantial increase in subsidies will help these people who have scrapped cars to actively update them and stimulate some demand," said Xu Haidong.

"Since April this year, as local governments have gradually improved their policy system for scrapping and renewal, the old-for-new car exchange program has been gradually rolled out across the country. Judging from the real-time statistics from the Ministry of Commerce, it has recently entered a stage of steady growth, with a large number of scrapped vehicles registered every day. The policy effect is being further continuously released." Xu Haidong said.

The industry predicts that the old-for-new policy is expected to boost car sales in the second half of the year and the whole year. Cui Dongshu, secretary general of the National Passenger Car Market Information Joint Conference, said that the boosting effect of the adjustment of subsidy standards will gradually emerge, and it is predicted that about 2 million private cars will be scrapped, with an average daily scrapping volume of 20,000 private cars.

Clearing bottlenecks

Promote the implementation of policies to facilitate the people

In addition to raising the subsidy standards, the "Notice" also clarified some details of the "Several Measures". Wang Du believes that this is mainly reflected in several aspects. First, it is clear that the new subsidy standards are retroactive, that is, individual consumers who scrap and purchase eligible vehicles between April 24 and December 31, 2024 will be subsidized according to the above standards, and the old subsidy standards will no longer be implemented. Among them, for subsidies that have been issued according to the old standards, local governments will make up the difference according to the new standards. Second, the holding time requirements for scrapped old cars are clarified, that is, scrapped old cars need to be registered in the name of the applicant before July 25, 2024 (inclusive). Third, urge all localities to speed up the replacement and renewal of passenger cars, and clearly require all localities to speed up the formulation of replacement and renewal implementation plans to ensure that the replacement and renewal benefits reach consumers as soon as possible.

In terms of optimizing the "Implementation Rules for Car Trade-in Subsidies", Wang Du believes that there are three main aspects. First, the holding period requirement for new cars has been increased. During the subsidy application review period, the new car should be registered in the name of the applicant. During this period, the transfer registration (i.e. transfer of ownership) procedures cannot be carried out to avoid inconsistent review and comparison information, which will lead to the inability to receive subsidies.

Second, we will optimize the application review and subsidy fund disbursement supervision process. Local governments can determine the local review level and review department according to actual needs. At the same time, we will optimize the review and supervision procedures of various departments and continuously improve the functions of the car trade-in information platform, thereby shortening the subsidy review and issuance time and allowing consumers to get subsidies as soon as possible.

Third, it is clear that provincial finances will arrange local matching funds. The local portion will be arranged by provincial finances in proportion to the central government's allocation of funds.

"This policy has optimized the processes at all levels to shorten the subsidy review and issuance time as much as possible, so that consumers can get the subsidies as soon as possible. Moreover, its implementation can be retroactive to the past, taking full account of consumers who have already submitted applications." Wang Du said.

Why is there such a change? Wang Du told reporters that with the implementation of the previous round of car trade-in policies, some problems have gradually emerged. For example, some consumers who applied for subsidies reported that the subsidy approval and issuance time was too long. The subsidies only included scrapping and renewal, not replacement and renewal, and could not cover the replacement needs of all consumers.

"In addition, local financial pressure is also one of the important factors affecting the implementation of the old-for-new policy." Wang Du admitted that local governments still face great difficulties in promoting the old-for-new policy for cars. This financial pressure has to some extent affected the policy's implementation and coverage, resulting in poor policy results.

"After the release of the Notice, first of all, the subsidy amount was increased, which increased the role of promoting consumption. Then, the local fiscal burden was reduced by further clarifying the burden ratio between local and central governments. In addition, replacement subsidies will be included in the subsidy scope. The state will directly arrange ultra-long-term special treasury bond funds to local governments to support local governments in independently carrying out replacement and renewal." Wang Du said, and in response to the problems that many car owners had previously reported, such as the long subsidy payment time, the new policy has also been compressed. The subsidy application review and fund disbursement supervision process will be optimized to shorten the fund payment time, and efforts will be made to allow everyone to get the subsidy as soon as possible.

In fact, these details for the convenience of the people were "preheated" before the release of the "Notice". On August 2, Xu Xingfeng, Director of the Market Operation and Consumption Promotion Department of the Ministry of Commerce, said in response to a reporter's question that all localities should promptly improve supporting measures, further optimize the review and funding of subsidies, speed up the review and improve the quality of services, make good connections between previous and subsequent policies, open up the "last mile" of applying for subsidies, and try to shorten the time from consumers submitting applications to receiving subsidy funds. "The car trade-in policy must also be retroactive. Those who have enjoyed a subsidy of 10,000 yuan in the past must also make up the difference according to the standard of 20,000 yuan. Consumers who consumed early must not suffer losses. This is also a reflection of policy connection."

However, at this stage, there is still room for improvement in the old-for-new car exchange. Jiang Zhao, an associate researcher at the Circulation and Consumption Research Institute of the Ministry of Commerce Research Institute, said in an interview with reporters that in response to consumers' growing demand for experiential and personalized consumption upgrades, my country's automobile consumption sector still has problems such as insufficient innovation and transformation of automobile circulation, insufficient efforts to create an automobile cultural atmosphere, and the need to increase automobile financial support, which have restricted the further improvement of automobile consumption.

"In the future, it is recommended to promote the transformation and upgrading of the automobile trading market, create an automobile commercial complex that integrates diversified business formats such as automobile display, sales, maintenance, catering, social interaction, and entertainment, and enhance the automobile consumption experience. Support places with conditions to build automobile cultural consumption venues such as automobile museums, car cinemas, and automobile cultural and creative markets to release the potential of automobile cultural consumption. In addition, financial institutions should be encouraged to develop diversified and personalized consumer credit products, and increase support for areas such as car trade-ins and self-driving tours." Jiang Zhao said.

Continue to exert efforts

Sales and recycling show double growth

Automobile consumption is an important part of national consumption. Since the beginning of this year, a series of policies to promote the replacement of old cars with new ones have been implemented.

In March, the State Council issued the "Action Plan to Promote Large-Scale Equipment Updates and Consumer Goods Trade-in", and promoting car trade-in is one of the important contents.

On April 12, the Ministry of Commerce and 14 other departments issued the "Action Plan to Promote the Trade-in of Old Consumer Goods", which clearly proposed to strive to accelerate the elimination of passenger cars with National III and below emission standards by 2025, and to double the amount of scrapped cars recycled by 2027 compared with 2023.

Soon after, on April 26, the Ministry of Commerce and seven other departments jointly issued the "Implementation Rules for Car Trade-in Subsidy", detailing the relevant subsidy amount, application review, fund management and other contents.

On June 1, the Ministry of Finance issued the Notice on the Budget for Central Government Pre-allocated Funds for Auto Trade-in Subsidies in 2024. On July 25, the National Development and Reform Commission and the Ministry of Finance issued the Measures on Further Supporting Large-Scale Equipment Renewal and Consumer Goods Trade-in, which comprehensively arranged ultra-long-term special treasury bond funds to vigorously support large-scale equipment renewal and consumer goods trade-in.

With the intensive implementation of policies, the effects are beginning to show.

"Data from the Ministry of Commerce show that as of 10:00 a.m. on August 16, 2024, more than 600,000 applications for vehicle scrapping and renewal subsidies have been received, with more than 10,000 new applications in a single day. From January to July this year, the national vehicle recycling volume was 3.509 million, a year-on-year increase of 37.4%. After the implementation of the vehicle scrapping and renewal subsidy policy, the number of scrapped vehicles has increased rapidly. Among them, the national vehicle recycling volume in July was 731,000 vehicles, a year-on-year increase of 93.7%." Wang Du cited data and said that these are the best proof that the effects of the old-for-new car policy are gradually emerging.

While the automobile recycling data increased, automobile sales also achieved rapid growth. Wang Du said that according to the data of the China Automobile Dealers Association, the national passenger car market retailed 1.72 million vehicles in July. The domestic retail penetration rate of new energy vehicles reached 51.1% in July, an increase of 15 percentage points from the penetration rate of 36.1% in the same period last year, breaking the 50% mark for the first time. From August 1 to 11, the passenger car new energy market retailed 274,000 vehicles, an increase of 57% over the same period last August, and an increase of 25% over the same period in July, both year-on-year and month-on-month. "This fully reflects consumers' recognition and support for the policy."

Regarding the issuance of this "Notice", the industry generally believes that the new policy will have a significant effect on boosting domestic automobile consumption and driving economic growth by promoting consumption.

"This year's series of car trade-in policies have greatly stimulated car consumption." Wang Du said that with the policy boost, it is expected that the number of scrapped cars will increase by 1 million, and the number of replacement cars will increase by 1.5 million; according to this growth scale, it can promote the growth of social retail sales by 168.3 billion yuan and 255 billion yuan respectively. At the same time, it is expected to increase car sales by more than 10% and social retail sales by about 1%.

□ Our reporter Liu Xuying