China’s Auto Market: Subsidies Halted, Demand in Question

China, a global leader in EV manufacturing due to its control over rare earth metals, is experiencing difficulties in managing its car inventory. Reports reveal that several Chinese cities have stopped offering subsidies for car purchases. This decision could potentially slow down car sales in China, the world’s largest economy. The subsidy suspensions are due to different reasons, including the exhaustion of allocated funds in some cities and efforts to improve capital efficiency in others. China had previously used subsidies to encourage consumer spending, especially on significant purchases like automobiles, amid a struggling property market and concerns about employment and wages. Data shows these subsidies helped drive a 6.4% growth. Although subsidies have been paused, the National Development and Reform Commission has confirmed that they will continue until the end of 2025. The automotive industry is currently under pressure due to a price war and the practice of selling new cars at reduced prices to clear stocks has added to the problem, leading to subsidy adjustments.