Cui Dongshu: It is expected that the domestic car market will see a year-on-year retail growth of 2% to 23.4 million units in 2025.

In 2024, the Secretary-General of the China Association of Automobile Manufacturers, Cui Dongshu, stated that the trend of the national auto market in 2024 will show a U-shaped growth trend. The strong implementation of the exchange of old for new and scrappage renewal subsidies in the second half of the year will drive an expected 5.7% increase in retail sales to 22.94 million units for the full year of 2024. The policy of exchanging old cars for new ones in various regions in 2024 has increasingly boosted sales. If the subsidy levels of scrappage renewal and exchange of old for new vehicles in 2025 remain the same as in 2024, Cui Dongshu estimates that the overall demand for subsidy funds for scrappage renewal and exchange of old for new vehicles will exceed 200 billion yuan, far surpassing historical subsidy peak values. Based on the continuation of the policies in 2024, it is predicted that domestic retail sales of vehicles in 2025 will reach 23.40 million units, a 2% increase, with retail sales of new energy passenger vehicles reaching 13.30 million units, a 21% increase, and a penetration rate of 57%. The external environment in 2025 is complex, with a significant decrease in incremental markets in the European Union and Russia, leading to an overall growth rate of passenger cars of around 10%. As of now, the overall policies and operational documents for scrappage renewal and the exchange of old for new vehicles in 2025 issued by the central government have not been released. January is a period of policy transition, with various regions promoting sales and encouraging policies aimed at maintaining the subsidy levels of 2024. Therefore, the period before the Spring Festival in 2025, with the continuation of the 2024 policies, is the best time to buy a car. I. U-shaped growth achieved in the Chinese auto market in 2024 1. Stable trend in the exchange of old for new vehicles in 2024 According to the Ministry of Commerce data, the overall sales of related products driven by the exchange of old for new policies for consumer goods exceeded 10 trillion yuan this year. As of December 19, the national scrappage renewal for automobiles exceeded nearly 2.7 million units and the replacement renewal exceeded 3.1 million units. The yellow data in the figure above is estimated. Based on the data as of December 19, it is estimated that there were over 3 million units of scrappage renewal for the whole year, indicating a strong and stable trend. Considering that there might be some delays in the reporting process, there may still be some additional reports at the beginning of January, and the total is expected to exceed 3 million units for sure. Currently, the effect of the new energy vehicle subsidy of 20,000 yuan and the fuel vehicle subsidy of 15,000 yuan for scrappage renewal is basically in line with expectations. Cui Dongshu estimates that the scale of scrappage renewal in 2024 will reach around 3 million units, requiring a subsidy of around 50 billion yuan. 2. Increasing contribution of scrappage renewal in 2024 According to the Ministry of Commerce data, as of September 14, the number of registered users on the automobile exchange platform for scrappage renewal has exceeded 1.5 million. At the same time, the platform has received over 1 million applications for automobile scrappage renewal subsidies. As of December 9, the total number of automobile scrappage renewal for the exchange of old for new vehicles nationwide exceeded 5 million units, with over 2.44 million units for scrappage renewal and over 2.59 million units for replacement renewal. As of midnight on December 13, the daily sales of passenger vehicles driven by the exchange of old for new vehicles exceeded 5.2 million units, with over 2.51 million units for scrappage renewal and over 2.72 million units for replacement renewal. As of December 19, the national automobile scrappage renewal was close to 2.7 million units, and the automobile replacement renewal exceeded 3.1 million units. Based on short-term data, the stable level of daily scrappage renewal over the past two months has been around 23,000 units, while the progress of exchange of old for new vehicles in various regions has not stabilized. Currently, the estimated scale should be around 50,000 units per day, due to the continued strengthening of the effect of the exchange of old for new policies. The total of the two is above 70,000 units per day. According to the current subsidy policies in various regions, the mainstream areas have subsidies that are approximately 5,000 yuan lower than those for scrappage renewal, with a difference of around 3,000 yuan between new energy vehicles and fuel vehicles. The effect of the exchange of old for new vehicles in various regions far exceeds expectations. According to the estimated data of 3.75 million units and a subsidy of around 13,500 yuan, the total amount is expected to be around 50 billion yuan. 3. Characteristics of U-shaped growth in the auto market in 2024 In 2024, the retail sales of the auto market showed a U-shaped trend, with 48.4 million units sold in the first quarter, a 13% year-on-year increase. In the second quarter, with the further increase in competitive pressure in the auto market, overall retail sales saw a 5% decrease. In the third quarter, with the comprehensive implementation of the national scrappage renewal and the gradual introduction of the exchange of old for new policies, the auto market returned to zero growth. With the promotion of the exchange of old for new policies, the fourth quarter saw a burst of growth, with a super-strong year-on-year growth rate of 14%, reaching around 14% in both the first and fourth quarters. The second and third quarters saw relatively low levels, forming the characteristic of U-shaped growth in the auto market in 2024, which was in stark contrast to the low-high trend in the auto market in 2023. In November, passenger car sales far exceeded expectations under policy stimulation, with a strong year-on-year growth mainly driven by policy stimulation for the passenger car market, especially the well-recovered fuel vehicle market. II. High-quality growth in the Chinese auto market in 2025 1. Excellent results from the two new subsidy policies in 2024 The retail sales in December 2024 in the table are estimated by Cui Dongshu in mid-month, and the actual retail data for December has not yet been reported, so the accuracy is not high. Looking at the data for the renewal and exchange of old for new vehicles, the overall subsidy scale rapidly increased from a scale of 500,000 units in July to nearly a million units in October, reaching 1.5 million units in November, and is expected to exceed 2 million units in December, indicating a tremendous increase in the numbers affected by the two new subsidies. If we estimate that the normal retail sales in December will be around 2.7 million units, then about 80% of the retail sales will be the result of scrappage renewal and exchange of old for new vehicles, with the proportions of the subsidies in October, November, and December being 40%, 60%, and 80% respectively. It is clear that the overall increase in quantity brought about by subsidies is extremely significant and has exceeded expectations. The subsidies for scrappage renewal and exchange of old for new in 2024 are both around 50 billion yuan, totaling around 100 billion yuan. According to the assumption that the central government will cover 90% of these subsidies, with the central government's burden reaching around 90 billion yuan, this represents a significant policy push. Based on the excellent results from scrappage renewal and exchange of old for new in 2024, if the policies are basically continued in 2025, good and stable growth effects should be achieved. Based on the spirit of the Central Economic Work Conference and the connection policy documents released by some provinces, it can be judged that the new policies for scrappage renewal and exchange of old for new vehicles in various regions at the beginning of 2025 should be directly continued without interruption until 2025, achieving good growth effects."Keep going until the end."2. Recent scale of preferential vehicle purchase tax The reduction in vehicle purchase tax as a stimulus to the automobile market at the national level is relatively low, with a maximum scale of several hundred billion. In 2015, the scale of vehicle purchase tax was 279.3 billion yuan, down 3%; in 2016, it was 267.4 billion yuan, down 4%; in 2017, it was 328.1 billion yuan, up 22%; in 2018, it was 345.3 billion yuan, up 5%. In 2022, due to the high increase in new energy vehicles affecting fuel vehicles, the national tax revenue decreased by 112.2 billion yuan. The subsidies policy for new energy vehicles is expected to have a total amount far greater than the vehicle purchase tax reduction policy in 2022 by 2025. Therefore, Cui Dongshu is worried that the subsidy policy in 2025 in various regions may have stricter standards and the subsidy amount may also decrease slightly after the transition period. 3. The best time to buy a car before the Spring Festival Chinese automobile consumption is mainly based on lunar consumption, which means that the timing of the Spring Festival has a particularly significant impact on consumption, especially in January. Therefore, the National Bureau of Statistics does not analyze consumption in January separately, but instead does a comprehensive analysis for January-February. However, the actual impact of the Spring Festival factor is extremely significant. This time, before the introduction of the new scrappage renewal and old-for-new policy in 2025, subsidies will be implemented according to the 2024 standards, which is a huge boon for the car market before the Spring Festival. In 2025, the current forecast for domestic retail growth is 2%, showing a trend of declining in the first quarter followed by an increase. The estimated growth rate in the first quarter is -3%, with a negative growth of over 10% due to the Spring Festival factor in January. As the scrappage renewal in the fourth quarter of 2025, and the old-for-new policy faces a decline, the new energy vehicle vehicle purchase tax reduction policy faces a decline, so the growth momentum in the fourth quarter of 2025 is estimated to be strong. The direction of the scrappage renewal and old-for-new policy in 2025 remains unchanged, but it is recommended to have a certain expansion of the target range, including consumer commercial vehicles such as pickups in the supported scope. Cui Dongshu suggests that the annual limit for the scrappage renewal and other indicators should be moderately extended to achieve a larger total scrappage capacity. These suggestions have no short-term impact on most consumers. Cui Dongshu believes that the subsidy policy of the old-for-new is extremely strong, the effect in 2024 is very good, and the outbreak at the end of the year is particularly strong, so the scale of the subsidy funds in 2025 seems uncontrollable. If it is simply considered that the subsidy in 2024 is 100 billion, then 2025 will support a scale of 200 billion, there is a risk. From the current good results, it seems that there may be some adjustments in the new policies for the old-for-new subsidies in various regions, and the direction of adjustment should not be to increase subsidies but to make the subsidy scale reasonable and controllable. Therefore, buying a car for replacement before January is the most suitable time. Do not wait until after the Spring Festival, when the new policies after the Spring Festival come out, it may be less generous than the policies in 2024. 4. The estimated retail penetration rate of new energy vehicles in 2025 is 57%. The penetration rate of new energy vehicles in domestic retail in the first 11 months of 2024 was 47%, with a penetration rate of 52.1% in November, an increase of 12 percentage points compared to the same period last year. The penetration rate of new energy vehicles will continue to increase in 2025. In 2021, the penetration rate of new energy vehicles in domestic retail was 15%, yielding an increase of 9 percentage points compared to 2020. In 2022, the penetration rate of new energy vehicles in domestic retail was 28%, yielding an increase of 13 percentage points compared to 2021. In 2023, the penetration rate of new energy vehicles in domestic retail was 36%, yielding an increase of 8 percentage points compared to 2022. In 2024, the penetration rate of new energy vehicles in domestic retail was 48%, yielding an increase of 12 percentage points compared to 2023. In 2025, the penetration rate of new energy vehicles in domestic retail is expected to be 57%, yielding an increase of 9 percentage points compared to 2024. As the penetration rate of new energy vehicles increases, gasoline vehicles become a minority group, with a decrease in economies of scale. Currently, gasoline vehicles have a heavy tax burden in vehicle purchase taxes and high consumption taxes on fuel during the usage stage, resulting in an unexpected decline in gasoline vehicles, which is not conducive to the smooth transformation of the automobile industry. Therefore, Cui Dongshu still calls for the subsidy amount for old-for-new of gasoline vehicles and new energy vehicles to be the same, achieving equal rights for oil and electricity.