Why is China renewing its car trade-in subsidy to boost hybrid and EV sales?

CGTN Europe interviewed Zhang Zhiwei, President & Chief Economist at Pinpoint Asset Management

Transcript

00:00Zhang Zhewei is President and Chief Economist at Pinpoint Asset Management.

00:05It has been very impactful, I would say, over the past few years.

00:10And, for instance, last year, I think half of the cars that are sold in China

00:15turns out to be EV cars, to some extent that's driven by this government subsidy program.

00:22And I think one year ago, in 2023, only about 31% of cars that were sold were EVs.

00:31So from 30% to 50% within a year, that's quite a big improvement.

00:37And it also applies to petrol and diesel cars with smaller engines too.

00:43How does this balance the move towards EVs with the ongoing demand for traditional vehicles?

00:50Yeah, there's a balance.

00:52So the government wouldn't want to shift all those subsidies to just the EV industry

01:00because there are, within the auto industry, there are quite many factories already.

01:07A lot of capex went in that gasoline car kind of segment.

01:14So the government tried to make a balance, but they do want to provide more subsidies for EV cars.

01:21And for that matter, the increase of EV purchase is quite significant over the past few years.

01:31So I think the government is managing to develop this EV industry already quite successfully.

01:40And the subsidy program doesn't just apply to vehicles, does it?

01:44Home appliances, tech devices like phones are included.

01:48What could this do to consumer behavior?

01:52I think it's already changing consumer behavior.

01:55So last year, we've seen some cities, local cities, provided subsidies for home electronic compliances

02:05and smartphones, and it turns out to be very successful.

02:10I think that's why the central government is now rolling out this program on the national level for all the cities in China.

02:17And I do think that the sales of these eligible products will pick up in the coming months

02:26and hopefully providing a booster for the macro economy.

02:30And what about China's place in the global EV market?

02:34What does this subsidy program do for that?

02:37I think over the past few years, the subsidies program contributed to this quite big increase of EV market share in China's auto market.

02:50And China now, I think, is already a leading market globally for EVs.

02:58I think that these kinds of subsidies played a very important role.

03:02But down the road, probably a lot of these developments, a lot of these subsidies will phase out in the coming years.

03:11But for this year, I think it will continue to play a big role.