Electric carmakers have welcomed China’s move to double cash subsidies for replacing internal combustion engine vehicles, while others have expressed doubts about China’s ability to stimulate consumer demand for large purchases.
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(Bloomberg) — Electric-car makers welcomed China’s move to double cash handouts for replacing internal-combustion-engine vehicles, while others expressed doubts that it would spur consumer demand for big-ticket purchases.
A one-time rebate for trading in old internal combustion vehicles, or electric vehicles registered before April 2018, for new eligible models has been doubled to 20,000 yuan ($2,800), according to an announcement from China’s financial and economic planning agencies late Thursday, as part of a 300 billion yuan package to stimulate consumer goods sales.
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Shares of electric car makers and related stocks rose on Friday.
Zhejiang Geely Holding Group, one of China’s largest private automakers, said it supports all measures to take old, inefficient vehicles off the road and increase the use of new energy vehicles, according to a company representative.
Social media accounts of Geely, Tesla and BYD dealers were also quick to post videos encouraging buyers to take advantage of the increased subsidies. A video posted by a BYD dealer in Yunnan province said a Qin Plus hybrid sedan priced at 79,800 yuan would cost just 59,800 yuan after the discount.
But there are questions about how effective the plan will be at a time when many Chinese automakers are struggling.
Morgan Stanley analysts led by Tim Hsiao wrote that the improved trade stimulus underscores the government’s commitment to boosting auto demand, but also highlights the challenges of sluggish domestic consumption and the ineffectiveness of previous sweeteners.
There are still concerns about people’s willingness to spend on big-ticket consumer goods like cars, analysts wrote in a note.
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China’s total automobile-related retail consumption in the first half was about 2.3 trillion yuan, down 1.1% year on year. Data from the National Bureau of Statistics shows that retail automobile spending in June was 437 billion yuan, down 6.2% compared with June 2023.
While automakers everywhere are struggling with falling demand, the problem, at least for many foreign automakers, has become particularly acute in China, where domestic brands often win consumers’ wallets.
Nissan Motor Co. cut its operating profit forecast on Thursday and closed a factory in China last month.
CEO Makoto Uchida said he doesn’t see much chance of the company’s situation in China improving in the near future. “It’s a very tough situation in the Chinese market right now. Local companies are launching new EVs every three months,” he said.
While Hyundai Motor reported record quarterly profits that beat analysts’ expectations, retail sales in China saw a sharp 32% decline.
Earlier this week, Honda Motor Co. announced that it would begin cutting production of gasoline-powered vehicles in China by 19% starting in October.
—With assistance from Charlotte Yang and Danny Lee.
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