The Chinese government announced on Tuesday that trade-in subsidies for new energy vehicles will remain in place next year, addressing remaining uncertainty over auto sales policies.
US-listed shares of Chinese carmakers jumped immediately after the announcement.
The Shanghai-headquartered EV maker Nio saw its stock price rise nearly 4% on Tuesday’s pre-market session, while XPeng rose by 3% and Li Auto edged 0.4% higher.
According to a statement by the National Development and Reform Commission and the Ministry of Finance, owners can receive up to 20,000 yuan ($2,850) when scrapping and replacing or trading in an old vehicle for an eligible NEV.
Those who scrap their vehicle and purchase a new NEV can get a subsidy of up to 12% of the vehicle price, capped at 20,000 yuan.
Owners trading in their old vehicle can receive 8% of the vehicle price, equivalent to 15,000 yuan ($2,140).
The policy is designed to promote vehicle renewal and adoption of more efficient alternatives.
Vehicle Trade-in During 2025
Late last year, China extended its vehicle trade-in program to 2025.
In June, the trade-in subsidy program for new vehicles was temporarily suspended across several provinces.
In multiple cities, the suspension was reportedly due to low funds and misuse, as ‘zero-mileage’ vehicles appeared in used-car markets.
In Shanghai, the application rules for the car trade-in subsidy were adjusted in October, with personal consumers now having to register and be selected to receive the subsidy eligibility.
The rules apply until December 31, with the following period still uncertain.
Earlier this month, Guangzhou’s local government announced it has committed up to 300 million yuan ($42.8 million) in consumer incentives for new vehicle purchases.
End of Purchase Tax Exemption
To increase EV adoption, China has waived the purchase tax on electric vehicles until the end of 2025.
However, from the first day of 2026, electric vehicles in China will start facing an initial minimum rate of 5% — half of the 10% tax applied to vehicle purchases in the country.
Up until the end of 2027, NEVs are subject to a 50% reduction in the tax, which applies as long as the tax reduction for each vehicle does not exceed 15,000 yuan — similar to the trade-in subsidy.
The measure leaves out premium and luxury NEVs, which will see the 10% reinstated from the beginning of 2026.
To offset the impact of the tax reinstatement, brands have announced they will be covering the tax themselves from January 1, as some deliveries may be delayed beyond the year-end.
It is the case of Xiaomi, facing a large backlog for its SU7 and YU7 models, or Nio, which has received substantial orders for its newly launched ES8 SUV.
Both companies are increasing production to meet high demand.
Analysts expected a year-end surge driven by upcoming policy changes, however, retail passenger vehicle sales in China dropped year over year in October by nearly 1% and further declined by 8.5% in November.
