Untapped Potential in Budget Car Market Hinges on Policy-Product Synergy

During the May Day holiday, counties such as Qinghe in Hebei, Heshui in Gansu, and Songtao in Guizhou launched auto consumption promotion campaigns, with new energy vehicles priced around RMB 100,000 performing relatively well in county and rural markets. However, overall, sales in China’s low-end vehicle segment remain sluggish. Data shows that in recent years, the average price of new passenger cars in China has continued to rise, while the share of models priced below RMB 100,000 has steadily declined. The current automotive market is characterized by strong performance in the premium segment and weak demand in the low-end segment. Government subsidies have significantly boosted high-end consumption, and local promotional efforts have largely focused on rugged off-road and plug-in SUVs priced between RMB 100,000 and RMB 200,000, with few affordable economy cars included in key promotion initiatives. Some industry insiders note that automakers’ resources are increasingly skewed toward premium models, leading to neglect of budget vehicles and lower-tier markets. In reality, there remains substantial unmet demand for affordable economy cars in county and rural areas, among elderly consumers, and in overseas markets. China’s vast population in lower-tier regions has both lower vehicle ownership rates and lower new energy vehicle (NEV) penetration compared to first- and second-tier cities, indicating significant potential for first-time purchases and vehicle replacements. For reference, kei cars account for nearly 40% of Japan’s market, while emerging markets like India show strong appetite for affordable models, and the European Union has already launched an initiative to revitalize small-car production. To stimulate demand in the low-end segment, experts recommend refining trade-in programs and implementing targeted subsidies, accelerating the rollout of EV charging infrastructure, and expanding product offerings tailored to lower-tier markets. Additionally, China should establish unified national standards for affordable electric vehicles and consider introducing a specialized Class C7 driver’s license to lower entry barriers for drivers. Coordinated efforts across policy, product development, and distribution channels will better align the automotive industry with the mobility needs of rural populations and an aging society, thereby supporting high-quality growth in the sector.