China, a dominant force in the global electric vehicle (EV) market due to its control over rare earth metals essential for battery production, is facing challenges in clearing its car inventories. Recent reports indicate that China has suspended car-buying subsidies in several cities. This move, potentially impacting new car sales in the world’s largest economy, stems from various factors. Zhengzhou and Luoyang cited depleted funds from Beijing’s subsidy program as the reason, while Shenyang and Chongqing attributed the suspension to measures aimed at improving capital efficiency. To stimulate spending amidst a property slump and concerns about wage growth and unemployment, China had previously offered subsidies on big-ticket items like cars. Retail data indicates that these subsidies contributed to a 6.4% growth. Despite the suspension, China’s National Development and Reform Commission has affirmed that subsidies would continue throughout 2025. The automotive industry faces scrutiny over a price war that has affected profitability. The practice of selling zero-mileage cars at discounted prices to clear inventories has further contributed to subsidy adjustments.
