Local governments in China dangle car subsidies to tap US$874 billion of excess savings, crank up post-pandemic growth
- The central province of Hubei is offering an up to 90,000 yuan (US$12,996) subsidy per buyer to induce sales at Dongfeng Motor showrooms
- At least 15 Chinese local governments have offered similar incentives to crank up an economic recovery and help unlock excess savings
More Chinese local governments are taking steps to generate big-ticket spending by consumers with subsidies for new car purchases, hoping to unleash 6 trillion yuan (US$874 billion) of excess savings into the economy.
Authorities in the central Hubei province offered as much as 90,000 yuan discounts on cars purchased from Dongfeng Honda Automobile, according to promotional leaflets at car dealerships. A 4,000 to 90,000 yuan rebate would also apply to other models produced by another Dongfeng Motor joint-venture.
“Such subsidies could buoy Dongfeng, a major employer there,” said Iris Pang, the Hong Kong-based chief economist for Greater China at ING Bank. “In turn, this will help the local government stabilise local employment and growth.”
Dongfeng Motor, based in the provincial capital of Wuhan, is a Chinese partner of PSA Peugeot Citroën of France and Nissan Motor of Japan.
Hubei is a latecomer, though. At least 15 other local governments have earlier rolled out similar incentives to fire up sales. The Shanghai municipality in January revived a 10,000 yuan subsidy for consumers replacing their petrol-guzzling cars with new-energy vehicles (NEVs). The subsidy originally expired at the end of 2022.
