As Bloomberg reports, the subsidy has been put on hold in large cities in the provinces of Guangdong, Henan and Zhejiang, among others. With the scrappage scheme, the Chinese government actually wants to incentivise the switch to electric cars and modern combustion engines. The subsidy amounts to the equivalent of up to 2,650 euros, and the government only extended the range of old vehicles that can be scrapped at the beginning of the year.

The subsidy has now been suspended regionally, as the funds for the subsidy, which was originally planned to run until the end of the year, are expected to run out. Bloomberg cites fraudulent loopholes as the second reason. Dealers are said to be exploiting the programme by buying new cars, registering them for discounts and then selling them as used cars without having driven them. ‘Regulators are looking at ways to prevent such practices and ensure proper budget allocation before encouraging car production again,’ reports Bloomberg, citing local media reports.

China introduced the scrappage scheme in April 2024 – initially for a limited period until 10 January 2025. At the beginning of the year, China’s National Development and Reform Commission (NDRC) then presented a document stating that the subsidy scheme would be maintained in 2025. Consumers who scrap their old vehicle and buy a new one can expect to receive up to 20,000 yuan if they opt for an electric car, and up to 15,000 yuan if they buy a modern petrol car. That is the equivalent of 2,650 euros and 1990 euros, respectively.

When the scrappage scheme was introduced in spring 2024, the subsidy rates were still a maximum of 10,000 and 7,000 yuan respectively, but were raised to the current level in summer 2024. In order to qualify for the subsidy programme, however, buyers had to dispose of relatively old cars in 2024: only petrol cars first registered in 2011 and older and diesel cars first registered in 2013 and older were eligible. In the current year, petrol cars from 2012 will also be accepted.

According to NDRC statistics, more than 6.5 million applications for the scrappage scheme were submitted in 2024. Bloomberg added that 4.12 million applications have already been received so far in 2025, up to and including May. According to data from the Chinese Passenger Car Association, around 70 per cent of all car purchases in May alone are said to have taken advantage of the trade-in subsidy.

The fact that the authorities are keeping an eye on the industry is also shown by a meeting that the Ministry of Industry and Information Technology and the relevant authorities recently convened with the heads of the largest electric car manufacturers in Beijing. In view of the wave of discounts on electric cars triggered by BYD, the top managers were urged to show moderation, according to insiders. The officials are said to have made it clear that manufacturers should not offer unreasonable price reductions or even sell cars below cost price. The practice of the aforementioned ‘zero kilometre reading’ cars was also denounced. There had also been a separate meeting with industry representatives on this shortly beforehand.

However, binding regulations did not follow. Officials initially hoped that the industry would ‘self-regulate’. However, the fact that the premium has now been suspended in some parts of China suggests that the government is also prepared to intervene directly.

bloomberg.com