The Zhitong Finance App learned that on April 27, Cui Dongshu, Secretary General of the Passenger Transport Federation, published an article stating that since the Spring Festival, consumers have been concerned about the trade-in policy and expect the policy to bring benefits to car purchases. Therefore, the implementation of the policy is a major benefit for the car market. It is estimated that the total amount of scrapped cars should reach a scale of nearly 10 million. Automobile trade-in subsidies will bring about a million-level increase of more than 100 billion dollars in annual consumption. In May, the car market will surely sweep away the downturn and achieve good growth. The fiscal effect of the subsidy policy is also expected to be remarkable. I feel that the output value driven ratio of 1 yuan of subsidy investment is 1:15, and the tax-driven ratio of 1 yuan for private scrapping renewal is 1:3. If the scrap renewal policy does a good job of providing a one-stop service for scrap renewal, and car companies make better policy support, the expected driving effect will be more prominent.

1. The scope of subsidies is generally good

A. Fuel vehicle standards: Fuel passenger vehicles with national emission standards 3 and below refer to gasoline passenger cars registered before 2011/6/30, diesel passenger cars registered before 2013/6/30, and other fuel type passenger vehicles.

China's national three emission standards for light gasoline vehicles were implemented nationwide on July 1, 2008; national four emission standards were implemented nationwide on July 1, 2011, while Beijing, Shanghai, Shenzhen and other places implemented national four emissions ahead of schedule in 2008 and 2009; national five emission standards were implemented nationwide on July 1, 2017. As of 2023, the number of domestic passenger cars is about 260 million, of which 15.83 million vehicles with emission standards in China are 3 and below, accounting for 6.0%; 68.97 million vehicles with national 4 emissions, accounting for 26.3%; and nearly 180 million vehicles with national 5 and above, accounting for 67.7%.

Passenger cars that emit 3 or less are all over 13 years old. The vehicle is in poor condition, and the emission pollution is serious.

There is also an average age of about 10 years for vehicles emitted by the country 4. Vehicle conditions and emission pollution are also increasing,... there is a strong demand from customers to replace cars with new ones. B. Scope of new energy vehicles: New energy passenger vehicles registered before April 30, 2018 (including the same date, same below). NEVs before April 30, 2018 were also 6 years old, and NEV technology should already be backward.

According to estimates of 336 million car holdings, corresponding to 7.56 million cars that were scrapped nationwide in 2023, the scrapping ratio was 2.2%. However, considering the characteristics of a sharp increase in the scale of automobile sales since 2008 during the scrapping cycle, the number of scrapped cars should be close to 10 million in 2024.

The scrapping and renewal of electric vehicles is complicated. In response to the objective factors of poor vehicle quality in the early days of electric vehicles, electric vehicles around 2016 should enter the scrapping cycle. However, because electric vehicle batteries are expensive to recycle, many users dispose of them to waste battery recycling companies. Since 2022, the scrapping of electric vehicles has mainly been transferred out of the zero-kilometer used car model and resold to markets such as Russia, not scrapping. Currently, the main market for scrapping and renewing the car market is still the scrap of fuel vehicles as the absolute main force. New energy vehicles before April 30, 2018 were also 6 years old, and should have a scale of 2 million units. Since the battery residual value of new energy used cars is still very high, there should also be 200 yuan to be scrapped and recycled for each kilowatt hour, and 50 kilowatts of electricity is 10,000 yuan, so the actual amount of waste is very large, but how to move from informal dismantling to formal dismantling is also a topic.

The base of scrapped vehicles according to comprehensive estimates is 16 million, some of which are unit-use vehicles, so the total amount precipitated is still quite large.

2. The subsidy standard is attractive

A subsidy of 10,000 yuan for end-of-life fuel vehicles and new energy vehicles and the purchase of new energy passenger vehicles; a subsidy of 7,000 yuan for scrapping passenger cars with fuel emission standards of 3 and below and purchasing fuel passenger cars with a displacement of 2.0 liters or less.

The model subsidy for the scrap subsidy is two lines. End-of-life fuel vehicles can be replaced with new energy vehicles and fuel vehicles, but end-of-life NEVs can only buy new energy vehicles, which brings about a greater possibility of purchasing new energy.

Only individual consumers can enjoy end-of-life subsidies. However, I feel that it is still necessary to scrap fuel vehicles and buy fuel vehicles or plug-in hybrid models. Mainly car owners who have owned cars for 10 years or more are mainly car owners who don't have a high operating rate, and it is more practical to buy fuel vehicles instead.

Cui Dongshu said that if the scrap subsidy policy is implemented normally, the number of scrapped units should be on the scale of 2 million units, and it is estimated that the country will spend nearly 20 billion yuan. If the publicity results are good and the service is good, it should be able to give further impetus.

The implementation of the policy is a major benefit to the car market. It is estimated that the total number of scrapped cars should reach a scale of nearly 10 million, bringing an increase of one million in the car market's consumption of new cars, as well as an increase in annual consumption of more than 100 billion dollars. The car market will inevitably sweep away the slump and achieve good growth in May. The fiscal effect of the subsidy policy is also expected to be remarkable. I feel that the output value driven ratio of 1 yuan of subsidy investment is 1:15, and the tax-driven ratio of 1 yuan of financial aid is 1:3.1.

3. Subsidy funds are guaranteed

The policy is clear: the automobile trade-in subsidy funds shall be shared by the central government and local finance as a whole according to the 6:4 ratio, and the specific sharing ratio is determined by region. Among them, the eastern provinces are shared according to the 5:5 ratio, the central provinces are divided according to the 6:4 ratio, and the western provinces are shared according to the 7:3 ratio. The provincial finance department takes the lead in implementing the portion of the local burden.

Cui Dongshu pointed out that the current policy subsidy fund sharing model reflects the practice of jointly promoting consumption. At the same time, I personally feel that the central financial pressure is also very high, so it is necessary to share subsidies with the local authorities. However, local finance is also difficult. Currently, it is difficult to guarantee funds for promotional fees, so the central government earns part of it first. This is also relatively easy to start implementation, which is beneficial for consumers to get subsidies quickly.

4. Local protection must be broken

The policy is clear: All relevant local departments should do a good job of subsidizing automobile trade-in funds in accordance with their responsibilities, and strengthen supervision and management. All regions shall not require end-of-life vehicles to be sold to designated enterprises, and shall not separately establish a regional or technical product-oriented subsidy catalogue or list of enterprises. All regions should set up telephone consultation hotlines for car trade-ins, respond promptly to public demands, and accept social supervision.

This shows the country's comprehensive considerations when formulating policies to prevent local protection from interfering with the unified national market. Local protection is very bad, so the central policy ensures fair competition in the market.

The country's liberalization of qualification and quantitative restrictions on end-of-life enterprises also created fair competition for scrapping early, allowing consumers to compare scrapping prices from various companies, obtain reasonable scrap prices, and receive better services, which is more conducive to the smooth implementation of scrapping.

5. Waste circulation requires concerted efforts to provide good services

For individual consumers, the automobile scrapping system has actually never been very smooth. Regular car scrapping is mainly policy scrapping before going to scrapping and dismantling sites. Some consumers don't know where the scrap outlets are, and scrapping takes time and effort. It's far less convenient to sell a used car directly to a 4s car shop and then replace it with a new one. In particular, many of the replacements are new cars with good brands. Driving the old car directly into the store is a new car, which is very trouble-free.

Domestic automobile retail sales are divided into new purchases, additional purchases, and exchanges. New purchases are viewed as integrated, and scrapped and purchased are the main groups, that is, report updates and new purchase groups are classified and considered. Since 2009, the car market has shown an explosive growth trend. From the perspective of renewal and scrapping from 5.67 million in 2008 to 24.2 million in 2017, it has now entered the peak stage of scrapping. According to the perspective of renewal and scrapping, the number of passenger cars scrapped in 2023 is about 5.67 million, 8 million in 2024, and 11.33 million passenger cars in 2025. The increase is extremely rapid. In 2027, it is estimated that there should be 13.66 million passenger cars, plus the renewal scale of commercial vehicles should reach 15 million units.

Cui Dongshu said that he expects car dealers to do a good job, run errands for consumers, and achieve integrated services for the delivery of end-of-life vehicles and the purchase of new cars. This is not only conducive to implementing the national end-of-life renewal policy, but also to consumer car purchase services.