Some Chinese cities suspend subsidies for purchasing cars because funds run out
Shanghai (Reuters) – At least six cities and municipalities in China suspended trade subsidies for car buyers in June, which could slow down new car sales in the world’s second-largest economy, according to Reuters’ review of government announcements.
The notice from the Zhengzhou and Luyang governments blamed the first round of funds allocated to the plan by Beijing on the suspension of subsidies, while Shenyang and Chongqing said the suspension was due to adjustments to improve capital efficiency.
A similar suspension has been issued in the northwest Xinjiang region.
The Chinese government tends to subsidize large items, including cars, household appliances and some electronics, to keep people’s sentiment as consumers in the country still stagnant amid long-term decline in property and concerns about wage growth and unemployment.
These plans received some enthusiasm. According to data from the country’s Ministry of Commerce, as of May 31, more than 4 million applications have been submitted this year.
China’s retail sales data released earlier this week were surprised at the rise and were considered one of the reasons for the 6.4% increase.
Although no official announcement will be made when plans will be released to the central government, the National Development and Reform Commission and the Ministry of Finance said the subsidies will continue throughout 2025, with leading analysts hoping to provide new funding for the third quarter starting in July.
However, subsidy plans have also been controversial, especially in the automotive industry. China’s auto industry is the world’s largest, causing criticism from regulators for deepening the price war, which has made the industry less profitable.
Last week, Zhengzhou was the capital’s official media, citing sources who declined to be named, and the Chinese central government has noticed some loopholes in the subsidy program and hopes to make adjustments.
One of the main issues identified by Chinese media and regulators is the so-called “used used cars in zero”, which refers to the practice of selling brand new cars as used cars at discounted prices to get rid of inventory.
A report by Dahe Daily, a newspaper owned by Henan government, added that the sale of “zero-bath used cars” is one of the key factors that lead to subsidies used before expectations and therefore needs to be suspended.
