May 26 is the date the 2024 Beijing New Energy Passenger Vehicle Index Allocation Results were released. According to reports, the current configuration released a total of 77,000 new energy passenger vehicle indicators, covering three types of indicators for households, individuals, and units.
“It's been a few months since I sold my car.” Staff at the NIO sales store located in Beijing's Blue Harbor business district told reporters that the release of the above indicators is expected to increase sales for several months.
It is worth noting that on May 29, the “2024-2025 Action Plan for Energy Conservation and Carbon Reduction” issued by the State Council specifically mentions speeding up the elimination of old motor vehicles and gradually lifting restrictions on NEV purchases in various regions.
Echoing this, the automobile trade-in subsidy policy previously jointly issued by the Ministry of Commerce and the Ministry of Finance, as well as activities for new energy vehicles to the countryside jointly organized by five departments including the Ministry of Industry and Information Technology, have been implemented one after another.
This series of policy combinations is aimed at stimulating automobile consumption in the short term; in the long run, it is implementing the “double carbon” goal.
Recently, the reporter visited several car sales stores in Beijing. A number of car sales consultants said that in the context of the intensive release of favorable policies, all car companies have responded positively to the government's call to “fill up” their concessions. Under the combined effects of multiple measures, consumers' willingness to visit and buy cars has been strengthened.
Trade-in stimulates active demand for trade-in
The ongoing price war that began in 2023 has not had a continuous stimulatory effect on the car market. In contrast, after high growth in the early period, the popularity of automobile consumption began to return to normal, and even became slightly cool.
According to data released by the National Passenger Vehicle Market Information Association (hereinafter referred to as the “Passenger Federation”), in April of this year, the national passenger car market retailed 1,532 million vehicles, down 5.7% year on year and 9.4% month on month. Regarding the cooling of the passenger car retail market, Cui Dongshu, Secretary General of the Passenger Transport Association, pointed out that factors such as price instability have led to a strong wait-and-see atmosphere among consumers.
The latest data for May shows that this wait-and-see sentiment has improved, but it hasn't completely subsided. According to the latest data from the Passenger Transport Federation, the national passenger car market retailed 90,000 vehicles from May 1 to 19, down 5% from the same period last year and up 19% from the same period last month.
The reason for this improvement is that many industry insiders classify it as a “red envelope” of policies that have been intensively issued recently.
In April of this year, seven departments, including the Ministry of Commerce and the Ministry of Finance, issued the “Automobile Trade-in Subsidy Implementation Rules”. From the date the rules were issued to individual consumers, a one-time fixed subsidy will be given to individual consumers scrapping fuel passenger cars with national emission standards of 3 or below or new energy passenger vehicles registered before April 30, 2018, and purchasing new energy passenger vehicles included in the Ministry of Industry and Information Technology's “New Energy Vehicle Model Catalogue for Reduced Vehicle Purchase Tax” of the Ministry of Industry and Information Technology.
Among them, there is a subsidy of 10,000 yuan for scrapping the above two types of used cars and purchasing new energy passenger cars; a subsidy of 7,000 yuan for scrapping passenger cars with fuel emission standards in the country 3 or below and purchasing passenger cars with a displacement of 2.0 liters or less.
According to reports, consumers only need to fill in the relevant information through the car trade-in subsidy application mini-program to claim the relevant subsidy. Recently, the Ministry of Commerce announced that the first batch of automobile trade-in subsidies in the country has been distributed. Currently, the five provinces of Shandong, Zhejiang, Sichuan, Henan, and Jiangsu rank among the highest in the number of consumer applications.
In fact, the provinces mentioned above also took the lead in responding positively to policies and introducing relevant plans after the central government policy was issued. Up to now, nearly 20 places, including Guangdong, Henan, Shandong, Hunan, Hubei, Jiangsu, Shanghai, Shanxi, and Ningxia, have introduced a series of plans to drive demand for car exchanges. Furthermore, the reporter learned that before seven departments including the Ministry of Commerce issued automobile trade-in subsidy policies, some provinces, cities, and regions had already carried out preliminary testing of the waters.
The stimulus of the above series of policies has brought about a heating up in the automobile market. According to Huatai Securities estimates, there are about 18 million passenger cars in stock that meet the requirements of this “trade-in” policy. The subsidy policy is expected to speed up the “wave of renewal” and lead to an increase in demand.
NIO's sales staff told the reporter that they clearly felt that there were more consumers who bought in May, and even colleagues in the store were getting new cars. According to reports, for replacing users, NIO provides 10,000 yuan of optional funds, combined with other preferential policies, and the cumulative discount margin can reach 31,000 yuan.
While actually investigating sales stores such as Jijie, Ideal, and Extreme Krypton, the reporter discovered that the joint introduction of replacement subsidies by the government and enterprises has indeed attracted some consumers to come to see and buy cars. Among these, household purchase demand is the main one. Many consumers who are interested in buying said that traveling with the elderly and children at the same time on the weekend is the root reason why they want to change cars. In the process of changing cars, they focused on MPV models or large SUVs.
At a time when the trade-in policy is in full swing, the release of another policy has added one more reason to buy a car. In the “2024-2025 Energy Conservation and Carbon Reduction Action Plan” recently issued by the State Council, it is clearly stated that it is necessary to promote energy saving and carbon reduction actions in transportation, speed up the elimination of old motor vehicles, and raise the entry standards for energy consumption limits for operating vehicles. Gradually lift restrictions on NEV purchases in various regions. Implement support policies such as facilitating the passage of new energy vehicles.
This means that with the elimination of old cars and the further loosening of new energy license plates, the market will free up more space for car purchases.
The response strength of car companies is different
Zhao Wei, chief economist at Guojin Securities, analyzed that this round of “trade-in” cars is being jointly supported by the central government and local finance, and the level of support may have reached a new high in recent years.
While the government fully supports it, car companies are also responding positively, “filling up” their concessions. According to incomplete statistics, up to now, dozens of car companies, including FAW-Volkswagen, FAW-Toyota, FAW Hongqi, Great Wall Motor, Dongfeng, Mercedes-Benz, BMW, NIO, Xiaopeng, Rantu, Jihu, Chery, Geely, and Changan Automobile, have responded to the trade-in policy.
Among them, FAW-Toyota introduced a replacement subsidy of 2 billion yuan; Mercedes-Benz introduced “Better Plus” multiple limited-time gifts. Not only can consumers enjoy a car purchase subsidy of up to 15,000 yuan, but they also have the opportunity to use a “0 down payment, 0 annual rate” financial plan.
According to reports, the response policies introduced by car companies are broadly divided into three types. One is cash subsidies; the second is a low-interest auto finance plan; and the third is insurance concessions.
During the actual visit, the reporter discovered that most car sales stores place display boards with trade-in discount programs in the most prominent place in the store.
Xiaopeng Motor's sales staff told the reporter that currently, if you replace your car in the store, you can enjoy a cash subsidy of 13,000 yuan; if you buy a car from a third party outside the store, you can enjoy a cash subsidy of 10,000 yuan.
Rantu Auto has also introduced replacement subsidies for all of its models, which are unprecedented. For example, if consumers buy an EV version of the Rantu Chase Light, they can enjoy a replacement subsidy of up to 50,000 yuan.
When the reporter asked about the expiration date of the above subsidy, Rantu Auto's sales staff said that the policy was originally up to April 30, but it is actually still continuing, and judging from the information received from the store, it may still be a long time until the end of the policy.
Sales staff from other car brands told reporters that preferential policies offered by stores are generally adjusted flexibly according to the month. When sales improve, manufacturers will guide store contraction policies, while when sales are sluggish, various preferential policies will continue.
As can be seen, whether it is a trade-in subsidy or continuous price reduction, it is actually a means for car companies to promote. At the same time, in order to speed up sales of some models, car dealerships will also adopt different subsidy measures.
The sales staff of Jihu Auto told the reporter that if you are the owner of BAIC New Energy itself, you can enjoy more discounts, but not all cars in the store include a trade-in subsidy.
The reporter noticed that the strength of car companies' response to trade-in policies and preferential margins are closely related to their own sales performance. Normally, car companies with weak sales performance are more willing to follow up on this wave of policies, while car companies that continue to increase sales are less willing to respond.
For example, while visiting the store and the Krypton sales store, the staff all told the reporter that there is currently no corresponding subsidy policy in the store.
The responsiveness of different car companies actually reflects the current phenomenon of heated competition in the car market. Some analysts told reporters that some car companies are actually taking advantage of this trade-in policy window to achieve disguised price reduction promotions. The cash subsidy given by car companies is actually also a kind of disguised price reduction.
A combination of trade-in policies promotes the conversion of old and new kinetic energy
The policy stimulus is compounded by the succession of car companies, which will undoubtedly revitalize the automobile market to a certain extent. Cui Dongshu said that automobile trade-in subsidies will bring an increase of one million in the car market's private consumption of new cars, and can also bring an annual consumption increase of more than 100 billion dollars. The car market will inevitably sweep away the slump and achieve relatively good growth in May.
Meanwhile, some other industry insiders believe that in addition to stimulating consumption, trade-in can also accelerate the transformation of the industry's old and new kinetic energy.
Shen Jinjun, president of the China Automobile Dealers Association, said that the automobile trade-in policy combo can leverage both stock and incremental markets by digging deeper into the demand and potential for renewed consumption. In this sense, the Association believes that “trade-in” is also a productivity transformation in the automobile industry. Through the conversion of old and new kinetic energy, the Association accelerates the cultivation and formation of new quality productivity in the automobile market.
Wu Songquan, chief engineer of the China Automobile Strategy and Policy Research Center at the China Automobile Center, also believes that the automobile sector still has great potential to promote consumption through reforms.
Wu Songquan also said that in order to speed up automobile circulation, it is also necessary to unleash the consumption potential of the automobile aftermarket. For example, to make used car transactions as smooth as new cars, in particular, it is necessary to improve the relevant policy system for the circulation of new energy used cars.
Editor/Jeffrey