China has had a profound hegemony over rare earth metals which are essential for the production of Lithium Ion Batteries around the world having a supremacy over EV manufacturing. Even after such expansive control, China has been struggling to clear off its car inventories. In a recent report by Reuters China has suspended the trade in subsidies for the car buyers in June. The report further details that such a change can further slow down the new car sales in the world’s biggest economy.
The report further elucidates, that governments from Zhengzhou and Luoyang blamed the subsidy phase in the first round of funding allocated by Beijing for the program running out, While, Shenyang and Chongqing said that the suspension was due to adjustments to further improve capital efficiency.
China has kept its residents’ propensity to spend high by offering subsidies for big ticket items such as cars, home appliances and other electronics to ensure that the economy is able to sustain the issues caused by prolonged property slump and concerns of wage growth and unemployment.
Retail Data Analysis
Retail data that the report showcases elucidates that such subsidies have been able to churn out a higher than expected 6.4% growth. While there has been no official announcement about when more funds would be released from the central government for the programs. China’s National Development and Reform Commission has confirmed that such subsidies would continue throughout 2025.
China’s auto industry renowned for being the worlds largest has attracted a lot of criticism from regulators over a deepening price war that has affected the profitability of the major players. Another issue has been the sales of zero mileage cars – which refers to the practice of selling brand new cars at a heavy discounted price just to clear off inventories. Such practices have further led to the suspension of subsidies.
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