China’s Vehicle Demand Under Scrutiny as Cities Cut Car Buying Incentives

China’s strategic dominance in the EV sector, fueled by its control over rare earth metals, is now facing a hurdle: clearing its car inventories. Reports indicate that China has withdrawn car-buying subsidies in various cities. This suspension of subsidies may slow down the new car sales in the country. Zhengzhou and Luoyang attributed the suspension to a lack of funds allocated from Beijing for the program. Shenyang and Chongqing cited efforts to enhance capital efficiency. Previously, China had offered subsidies on large purchases, including cars and home appliances, to boost consumer spending amid economic concerns like the property market slump and issues of unemployment. Retail data indicates these subsidies contributed to a 6.4% growth. Despite the recent suspensions, China’s National Development and Reform Commission has declared that subsidies are slated to continue through 2025. The auto industry is under scrutiny due to a price war which has affected profitability. The practice of selling new cars at significantly reduced prices to clear inventories has also contributed to the subsidy adjustments.