?Editor's Note

Recently, the national and local levels have successively issued policies for car trade-in, and automakers have also followed suit, sharing the benefits of the policy package. Under the guidance of the government and with the market as the main force, the car trade-in action, supported by the combined effect of policies, will greatly release the potential of car consumption, promote the qualitative upgrading of the automotive industry, and have a profound impact on the new round of development of the automotive industry. Focusing on this round of trade-in, "Auto Industry Review" has specially made this issue's "Cover Story" special report. This special report consists of 5 articles, and the 3rd article is released today. Please pay attention.

From the national level to the local level, and then to auto brands, the intensity of this round of "trade-in" policies is unprecedented. The "big-budget" promotional concessions shown by independent auto brands reflect their determination and confidence in seizing this wave of market dividends.

Favorable policies are coming again. On March 7, the State Council issued the "Action Plan for Promoting Large-scale Equipment Renewal and Consumer Goods Trade-in"; on March 27, the Ministry of Commerce and 14 other departments issued the "Action Plan for Promoting Consumer Goods Trade-in"; on April 26, the Ministry of Commerce, Ministry of Finance, and 5 other departments issued the "Detailed Rules for Implementing Subsidies for Car Trade-in" (hereinafter referred to as "the Detailed Rules"), clarifying the national-level subsidy policy for car trade-in, providing subsidies of 7,000-10,000 yuan for eligible vehicles.

Policies set the stage, and auto brands take the stage

With the help of policy incentives, domestic independent auto brands have quickly followed up, introducing superimposed subsidy policies for their respective brands or models. According to incomplete statistics, after the issuance of the aforementioned "Detailed Rules", mainstream independent auto brands have almost fully participated, such as BYD, Changan Automobile, Geely Automobile, NIO, Xpeng, and other independent brands have successively announced additional brand-specific discounts in addition to government subsidies to capitalize on this wave of trade-in policy-driven market dividends. From the perspective of concession levels, some models under brands like Dongfeng Fengxing, Changan Automobile, and FAW Hongqi have comprehensive discounts of up to more than 50,000 yuan, while some models from Beijing Automobile, SAIC-GM-Wuling, GAC Trumpchi, Xpeng, Haval, and Chery have also exceeded 40,000 yuan. However, popular models like BYD have been relatively restrained, with comprehensive concessions of less than 30,000 yuan.

According to rough estimates, with the combined manufacturer trade-in subsidies and government trade-in subsidies, consumers who scrap old fuel vehicles and purchase new energy vehicles can obtain a minimum discount of around 20,000 yuan. In terms of activity formats, besides cash discounts, trade-in subsidies, financial plans, and other benefits are also combined for different consumers to choose from. For example, BYD, NIO, and others offer "0 down payment" and "0 interest" car purchase plans, while Xpeng, NIO, and others offer optional discounts, as well as various product vouchers, charging/swapping vouchers, and other benefits. In fact, before the issuance of this "Detailed Rules," most auto brands were continuously or temporarily offering multiple trade-in incentives, including cash subsidies, optional funds, or financial loan plans.

At the end of March and beginning of April, Dongfeng Motor Group launched a trade in program, involving over 50 models, with an expected subsidy of over 10 billion yuan; Geely Automobile has released preferential policies for purchasing some of its models in April, offering discounts of up to 53000 yuan for old car exchanges; Chery Automobile has launched a subsidy exchange season of 10 billion yuan, with a limited time specified model purchase tax exemption and a maximum of 30000 yuan for used cars; NIO Automobile also launched a maximum subsidy of 1 billion yuan for gasoline vehicle replacement on the same day. Oil vehicle users who replace NIO's new cars will receive an additional 10000 yuan in optional equipment fund subsidies... With the implementation of the old for new policy, coupled with increased benefits from car companies and subsidies from local governments, a combination of multiple benefits will further promote the heating up of consumption in the automotive market.

Independent car companies benefit from "trade in old for new"

The trade in policy launched in 2024 may be the strongest in recent years. Industry analysts believe that, on the one hand, under the promotion of policies, automobile companies will increase their research and development efforts and launch new models that are more environmentally friendly, intelligent, and safe to meet the diverse needs of consumers; On the other hand, the implementation of policies will also drive the development of the upstream and downstream of the automotive industry chain, promoting the transformation and upgrading of the entire automotive industry. Driven by the large-scale trade in, according to industry insiders, the current common replacement cycle for traditional fuel vehicles is 6 to 8 years, and the replacement cycle for new energy vehicles is 3 to 5 years. It is predicted that 40% of the consumer growth in the passenger car market this year will come from trade in. Based on last year's 26 million passenger car sales, approximately 10 million passenger car sales will come from trade in 2024. For car companies, in addition to being ahead of schedule when policies come, what is more important is the basic judgment of survival of the fittest in the next two years.

Increasing the demand for replacement has become a common understanding among independent car companies. Behind the official reduction of new cars and billions of subsidies, "replacement" has become a necessary incremental market for car companies. Caixin Securities believes that with the implementation of government subsidies and the benefits provided by automotive companies, independent brand car companies with a relatively high proportion of new energy product sales will greatly benefit from this round of "trade in" policies. And this benefit will also bring a virtuous cycle. Wang Peng, Associate Researcher at the Beijing Academy of Social Sciences, believes that "policies tend to encourage the purchase of new energy vehicles, which will change the model structure of the automotive market. The proportion of new energy vehicles will gradually increase, which will help shape the green and environmentally friendly image of Chinese independent brand cars, and further enhance international recognition."

In fact, with the help of new energy vehicles, the market share of domestic brand passenger cars in China has repeatedly reached new highs in recent years. The market share of domestic brand passenger cars in April and the first four months of this year both exceeded 60%, accounting for 63.5% and 60.7%, respectively. Starting from 2021, the market share of domestic brand passenger cars has continued to rise, reaching 56% in 2023 and 60.7% in the first four months of this year, reaching a new high. The market share of independent brands continues to expand, thanks to their significant growth in the new energy market and export market. At the same time, the rapid growth of the new energy vehicle market is mostly contributed by independent brands. From January to April this year, the cumulative sales of new energy vehicles have reached 2.94 million units, a year-on-year increase of 32.3%, and the market penetration rate has reached 32.4%. Among them, the penetration rate of domestic brand new energy passenger vehicles has exceeded half. It can be said that the phased success achieved by domestic brands and new energy vehicles is the result of their mutual efforts and achievements.

A trillion dollar scale market may arrive

Zhao Chenxin, Deputy Director of the National Development and Reform Commission, stated that the demand for car replacement and renewal is above trillions of yuan, coupled with recycling and reuse, the market space is very large, and its contribution to economic growth is self-evident. In fact, entering the stock market stage, this round of trade in is also a breakthrough for the automotive market to enter high-quality development. Therefore, many industry insiders believe that the introduction and implementation of this round of trade in policy is a timely rain that boosts market confidence and releases consumer demand. Xu Haidong, Deputy Chief Engineer of the China Association of Automobile Manufacturers, said that from the current market development trend, it is highly likely that the second quarter will show a good development trend. However, in the third quarter, due to the influence of factors such as the increase in base last year, the car market is likely to show a development trend of high in the front and low in the back for the whole year. At the same time, in addition to the new car market growth brought about by trade ins, second-hand cars will also benefit the most from this round of trade in. Replacing old cars with new ones not only increases the source of second-hand cars, but also, with the expansion of the second-hand car market, it will force the further standardization of second-hand car management, using norms and efficient circulation to improve the industry's operational level.

In the "Action Plan for Promoting the Trade in of Consumer Goods" (hereinafter referred to as the "Plan") jointly issued by 14 departments prior to the "Detailed Rules", it was proposed to increase policy guidance and support, and strive to accelerate the elimination of passenger cars with National III and below emission standards by 2025, with a 50% increase in the number of scrapped cars compared to 2023; By 2027, the recycling volume of scrapped cars will double compared to 2023, and the transaction volume of used cars will increase by 45% compared to 2023. Liu Feng, Director of Market Operation Research at the China Automotive Strategy and Policy Research Center, stated that the recycling of scrapped motor vehicles is the ultimate link and end of export in the circulation of automobiles. As of the end of 2023, the number of old vehicles with a vehicle age of over 15 years in China has exceeded 8 million. If half of these vehicles participate in this round of trade in, based on the average selling price of new cars of 170000 yuan, it is expected to bring about a new car consumption scale of 700 billion yuan, which can further drive the full chain development of the automotive market. In addition, according to a research report by Guangfa Securities, driven by policies, automobile recycling and dismantling is expected to form a billion yuan industry after 2025.

In addition, the Plan also proposes to promote the transformation of cars from transportation to living spaces, support the development and growth of related industries such as car modification, car rental, car racing, RV camping, and traditional classic cars, help further expand consumption scenarios from transportation to daily life, meet the diversified needs of consumers, enhance the driving role of the automotive aftermarket in industrial and economic development, and fully unleash its consumption potential. With the assistance of a new round of policies, a trillion yuan market may arrive. How to seize this wave of "sky shattering" opportunities to the fullest extent? The self owned brand car companies that understand the Chinese market the most have started the "Eight Immortals Crossing the Sea, Each Showing Their Skills" model, and who will become the biggest winner, let us wait and see.