The Chinese city of Guangzhou’s government announced new vehicle purchase subsidies on Wednesday, amid ongoing uncertainty over the country’s auto sales policies.
The port city, located in the province of Guangdong, is home to automakers such as XPeng and the state-owned GAC.
The local government has committed up to 300 million yuan ($42.6 million) in consumer incentives.
The subsidies will have two different tiers: one of 4,000 yuan ($568), and another at 5,000 yuan ($710).
They will each total 150 million yuan, equivalent to $21.3 million.
In a statement, the city said “funds under each subsidy tier are not interchangeable,” and “campaign funds will be strictly managed under the principle of total quota control, first come first served, and termination once funds are exhausted.”
The funding aligns with both provincial and municipal fiscal budgets.
Trade-In Policies
Late last year, China extended its vehicle trade-in program to 2025.
The subsidy offers up to 20,000 yuan (about $2,800) for electric and fuel-efficient vehicle purchases.
In June, the trade-in subsidy program for new vehicles was temporarily suspended across several provinces.
In multiple cities, including in Guangdong, the suspension was reportedly due to low funds and misuse, as ‘zero-mileage’ vehicles appeared in used-car markets.
As the end of the year approaches, and as other clean energy-related policies are withdrawn or reduced, it remains unclear whether the trade-in subsidy will be renewed for 2026.
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.
Retail passenger vehicle sales in China dropped year over year for the first time in October (by 0.8%), if excluding the period between late January and early February, when production is disrupted due to the Chinese New Year Holiday.
In November, auto sales fell by 8.5%, even though analysts had expected a year-end surge driven by upcoming 2026 policy changes.
EV Policy Change in China
To increase EV adoption, China has waived the purchase tax on electric vehicles until the year end.
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, new energy vehicles (NEV) are subject to a 50% reduction in the tax, which applies as long as the tax reduction for each vehicles does not exceed 15,000 yuan (about $2,100).
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.
Xiaomi is facing a large backlog for its SU7 and YU7 models, while EV maker Nio has received substantial orders for its newly launched three-row SUVs, the Nio ES8 and Onvo L90.
Both companies are increasing production to meet high demand.
Auto Pricing Rules
Last week, China’s State Administration for Market Regulation released draft guidelines outlining rules for automotive pricing.
The guidelines list nine practices that could lead to enforcement actions, which include offering discounts or subsidies that reduce the factory price below cost.
Additionally, giving extra products or services to lower the effective pricing and submitting bids below cost in tenders will be sanctioned.
Manufacturers and dealers were warned that selling vehicles below production cost to eliminate competitors or monopolize the market carries “significant legal risks.”
However, selling below cost is still allowed when clearing excess inventory.
