At least six cities and regions in China have suspended their car trade-in subsidy programs this month, a development that could dampen auto sales momentum in the world’s second-largest economy. The suspensions come as the initial round of central government funding for the incentive program runs dry and regulators respond to mounting concerns over misuse.
Local authorities in Zhengzhou, Luoyang, Shenyang, and Chongqing, along with the Xinjiang region, cited either exhausted funding or adjustments aimed at improving the efficiency of capital use, according to official notices reviewed by Reuters. The program, part of a broader government effort to spur domestic consumption, had generated more than four million car-related subsidy applications by May 31, according to China’s Ministry of Commerce.
Subsidies for large consumer goods, including vehicles and electronics, have been a key pillar of China’s strategy to boost spending amid sluggish consumer sentiment, a prolonged property downturn, and labor market anxieties. While the stimulus efforts have helped, with May’s retail sales growing 6.4% year-on-year, auto sector controversies have surfaced. Reports from state-run media, including Dahe Daily in Henan province, allege abuse of the program through “zero-mileage used cars”—vehicles sold as second-hand to qualify for subsidies despite being new or nearly unused.
This alleged loophole, alongside rising concerns over an industry-wide price war, has drawn criticism from regulators. Great Wall Motor chairman Wei Jianjun publicly denounced the “zero-mileage” practice, and the People’s Daily later echoed calls for a crackdown. In early June, the industry ministry summoned carmakers to urge an end to aggressive discounting, signaling heightened scrutiny over pricing and promotional tactics.
Although no official timeline has been announced for the release of new funds, China’s National Development and Reform Commission and Ministry of Finance have indicated that subsidy programs will continue through 2025. Analysts expect additional funding could be unlocked in the third quarter, potentially as early as July.