Car sales in China experiencing significant growth ahead of upcoming subsidy termination
The Chinese car market witnessed a significant surge in June 2021, with a record-breaking 2.08 million passenger cars delivered, according to the China Passenger Car Association (PCA). This increase occurred in major cities across the People's Republic of China, despite the expiration of purchase subsidies in those areas.
The growth in car deliveries was driven by a combination of factors. The expiration of subsidies, which previously helped lower the effective price of vehicles, led to a surge in demand. This trend was evident in June 2021, as consumers took advantage of the opportunity to purchase new cars before the subsidies expired.
Interestingly, the expiration of subsidies in June 2021 did not have a significant negative impact on the Chinese car market. Instead, it facilitated the growth in deliveries, contributing to an overall 18% increase in deliveries to end customers compared to June 2020.
However, the situation in the car market is not without complications. Some manufacturers have been accused of inflating sales figures by selling new cars as "used" vehicles, particularly for export purposes. This practice has allowed them to artificially maintain sales volumes despite weaker domestic demand due to subsidy removal.
Moreover, the industry is facing a shakeout among electric vehicle (EV) makers, with predictions that only about 15 EV brands will survive by 2030 amid regulatory pressure and reduced subsidies. This consolidation is partly driven by the subsidy removal, which reduces price incentives and forces weaker players out.
In contrast, the expiration of subsidies in June 2025 has had a more noticeable impact on the Chinese car market compared to the previous year. According to recent reports and industry analysis, the purchase subsidies ending in June 2025 have contributed to a slowdown in new car sales growth in China. The China Passenger Car Association (PCA) has noted that while there was a boost in sales when subsidies were active, the expiration led to a decline or stagnation in passenger car sales in June compared to the same period last year.
In essence, the expiration of subsidies in June 2021 led to a record-breaking month for car deliveries in China, while the expiration in June 2025 has weakened the growth momentum the Chinese car market enjoyed previously, leading to slower sales and a more challenging environment for manufacturers. The PCA's data suggest sales figures have been affected negatively relative to the prior year, which had the support of purchase incentives. Meanwhile, the market is adapting through tactics such as exporting zero-mileage "used" cars and industry consolidation among EV brands to cope with the new subsidy landscape.
The surge in car deliveries in China's car market in June 2021 was not solely due to the expiration of subsidies but also a result of consumers buying new cars before they expired. Despite subsidy removal, the finance sector saw an overall 18% increase in deliveries to end customers compared to June 2020, contributing to the growth in the automotive industry.
The expiration of subsidies in June 2025, however, has led to a decline or stagnation in passenger car sales in China compared to the same period last year, impacting the growth momentum previously enjoyed by the automotive sector. This has resulted in a more challenging environment for manufacturers, leading to slower sales and tactics such as exporting zero-mileage "used" cars and industry consolidation among electric vehicle (EV) brands to cope with the new subsidy landscape.
