China has suspended its electric vehicle (EV) scrappage subsidy program in major cities across at least six provinces, including Guangdong, Henan, and Zhejiang, as funds run low and regulators seek to curb fraudulent practices linked to the scheme, according to a Bloomberg report.
Launched in April 2024, the scrappage scheme was designed to incentivize consumers to replace old petrol and diesel vehicles with electric or cleaner combustion models. Subsidies were increased during the summer of 2024 to a maximum of 20,000 yuan (€2,650) for new EVs and 15,000 yuan (€1,990) for efficient petrol cars. Initially scheduled to run until January 10, 2025, the program was later extended for implementation into 2025.
Despite its popularity—over 6.5 million applications were submitted in 2024 and more than 4.1 million by May 2025—the scheme has now been paused in several regions. Bloomberg, citing local media, reported that the decision was made due to both depleted funding and concerns about misuse. One tactic under scrutiny involves dealerships registering new cars to claim the subsidy and then reselling them as used vehicles with zero mileage, effectively bypassing the program’s intended purpose.
“Regulators are looking at ways to prevent such practices and ensure proper budget allocation before encouraging car production again,” Bloomberg reported.
The Chinese government had broadened the eligibility criteria for the scheme earlier this year to include more vehicles. Petrol cars from 2012 and earlier, as well as diesel cars registered before 2013, could be scrapped in exchange for the subsidy. Data from the China Passenger Car Association indicates that around 70% of all car sales in May were linked to the subsidy.
Amid rising concerns, the Ministry of Industry and Information Technology recently held meetings with senior executives from major EV manufacturers in Beijing. According to insiders, officials urged automakers to avoid aggressive discounting practices—such as selling below cost—and warned against the ‘zero kilometre’ resales that exploit the trade-in program.
No formal regulations have yet been introduced, with officials reportedly hoping for voluntary compliance from the industry. However, the regional suspension of the subsidy scheme suggests the central government may be prepared to implement more direct measures if self-regulation fails.