Shanghai raises the trade-in subsidy standards, leading to a significant increase in demand for car replacements.

Since the implementation of the trade-in policy in the first half of this year, Shanghai has recently increased subsidies for scrapping and replacing old vehicles with new energy vehicles. According to the "Shanghai Implementation Plan on Further Intensifying Efforts to Promote Consumer Goods Trade-In Programs," issued jointly by the Shanghai Municipal Development and Reform Commission and the Shanghai Municipal Finance Bureau, individual consumers who scrap fuel-powered passenger vehicles meeting Emission Standard III or lower, or new-energy passenger vehicles registered on or before April 30, 2018, and subsequently purchase either a new-energy vehicle listed in the "Catalog of New-Energy Vehicle Models Eligible for Vehicle Purchase Tax Exemption" or a fuel-powered passenger car with an engine displacement of 2.0 liters or less, will now receive enhanced subsidies: up to RMB 20,000 for purchasing a new-energy vehicle, and up to RMB 15,000 for buying a fuel-powered car with a displacement of 2.0 liters or less.
Meanwhile, the new plan adjusts Shanghai's existing trade-in subsidy standards for automobiles. For eligible individual consumers who trade in their old vehicles to purchase pure-electric compact cars, the subsidy has been increased to 15,000 yuan; for those who trade in their old vehicles to buy National VIb fuel-powered compact cars, the subsidy is now up to 12,000 yuan. Compared to the previous incentives for vehicle scrapping and replacement, this policy offers enhanced benefits. Several auto brands have told Interface News that they’ve already received notification of these adjusted subsidies, meaning car owners can apply when purchasing a new vehicle—but note that the two subsidies cannot be combined. In addition, some brands are currently offering manufacturer-backed trade-in incentives ranging from several thousand yuan to as much as 10,000 yuan. The implementation of the trade-in policy has given a significant boost to the automotive consumer market, primarily by driving up the number of vehicles being scrapped and spurring sales of new cars.

UBS analysis indicates that domestic auto sales are expected to grow by 4% this year, with the primary driver being the replacement of scrapped vehicles. During the last scrappage cycle (2008–2010), passenger car sales surged significantly. Calculating based on a 15-year vehicle lifespan as the typical scrappage period, many cars have now reached the end of their useful lives. According to estimates from relevant authorities, the upcoming wave of vehicle scrappage and replacement could generate market demand for up to 8.2 million vehicles. Earlier data revealed that, as of August 22, the Ministry of Commerce’s “Trade-In” information platform had already received over 680,000 applications for subsidies aimed at promoting vehicle scrappage and renewal programs. From January to July this year, China recycled 3.509 million scrapped vehicles nationwide, representing a year-on-year increase of 37.4%.
In terms of new car sales, dealers noted that currently about half of consumers purchasing new energy vehicles are doing so to trade in their existing cars. The situation also varies across Shanghai's districts: increasing the intensity of trade-in subsidies can encourage buyers who are already considering upgrading to make a decision—and even help them quickly proceed with the purchase. However, qualifying for these trade-in incentives does require meeting certain conditions. According to Shanghai’s standards, trade-ins must involve holding an official Shanghai license plate quota, and the old vehicle must be registered under the same individual who is buying the new car. Typically, the rationale behind car trade-ins leans toward upgrading—meaning customers often opt for a higher-priced model within the same vehicle category. That said, the market dynamics differ slightly when it comes to trading in fuel-powered cars for new energy vehicles. In this scenario, both “affordable upgrades” and “premium upgrades” are common, with traditional luxury-brand fuel cars generally shifting toward high-end new-energy brands.
The sales of high-end new-energy vehicle brands reveal that as many as 80% of consumers choosing to trade in for these brands are switching from traditional fuel-powered car brands—primarily existing users looking to upgrade or add to their current vehicles. Meanwhile, younger consumers eager to purchase their very first car account for a relatively smaller share. According to the latest data released by the Passenger Car Market Information Joint Association under the China Automobile Dealers Association, preliminary statistics show that China’s passenger car retail sales reached 1.91 million units in August, marking a 1% decline compared to the same period last year. However, this figure represents an impressive 11% increase from July, highlighting that despite an overall slowdown in market growth, consumer demand driven by trade-ins and additional purchases continues to inject vitality into the industry.

Translated from Sina Auto

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