Trade-ins and Scrappage Programs Drive China's Auto Market Growth

China's automotive industry is transitioning from a phase of high-speed growth to one of high-quality development. Against the backdrop of slowing domestic demand and mounting profit pressures on automakers, replacement purchases and scrappage-driven upgrades have replaced first-time buying as the core drivers of market growth. With China’s vehicle fleet now approaching 400 million units, a large number of vehicles are entering their replacement and end-of-life cycles, propelling replacement and scrappage-upgrade demand from a supplementary role to a dominant force. Data shows that in 2025, vehicles replaced through scrappage programs will account for a significant share of national auto sales, while the proportion of replacement purchases continues to rise, accelerating the release of market potential. This trend is not only boosting sales volumes but also driving up average selling prices and product value-added, thereby facilitating industrial transformation and upgrading. Consumer purchasing behavior is evolving accordingly, characterized by consumption upgrading, premiumization, electrification, and intelligent features. Price ranges are shifting upward, product choices are becoming more diverse, and new energy and smart technologies are rapidly gaining adoption, further bolstered by policy incentives that enhance consumers’ willingness to replace their vehicles. To unlock this market potential, it is essential to refine subsidy mechanisms, strengthen the vehicle scrappage and recycling system, optimize policies tailored to specific market segments, enhance the second-hand vehicle circulation infrastructure, and introduce dedicated financial products to lower replacement costs. Additionally, fostering automotive culture, expanding consumption scenarios, and focusing on the needs of niche consumer groups will help build a comprehensive ecosystem to support the industry’s long-term, stable growth.