by Chinese auto subsidies: dealer tricks and temporary restrictions
The Chinese government is actively supporting the auto market through a program of subsidies for exchanging old cars for new ones. However, some dealers have found a way to abuse this system by selling brand new cars as “used with zero mileage” to receive government payments. As a result, at least six cities have temporarily suspended the program, which will force local buyers to pay more for new cars.
The cities of Zhengzhou, Luoyang, Xinjiang, Chongqing, and Shenyang have already announced the suspension of subsidies due to the exhaustion of allocated funds. This program was initially aimed at stimulating consumer spending during the country’s economic difficulties. According to the Ministry of Commerce, over 4 million applications for subsidies were received in the first five months of 2024.
How dealers bypass the system
In addition to selling new cars under the guise of used ones, some dealers register cars as “test drive vehicles,” which also allows them to claim government payments. Such schemes have led to the rapid depletion of the program’s budget in a number of regions.
“Subsidies for the automotive industry, electronics, and household appliances contributed to a 6.4% growth in local retail sales in May”
Despite local suspensions, national authorities confirm that the subsidy program will continue to operate throughout 2025. However, the exact timing for the arrival of new tranches of funds has not yet been announced, creating uncertainty for buyers and dealers.
This situation demonstrates how well-intentioned economic initiatives can stumble due to shortcomings in their implementation mechanisms. While the government is looking for ways to prevent fraud, the country’s auto market is facing new challenges—from rising prices to a temporary loss of consumer trust in government support programs.
