New Chinese vehicle subsidy policy for 2026: budget cars to see smaller subsidies under percentage formula
China’s National Development and Reform Commission and Ministry of Finance have announced adjustments to the country’s vehicle trade-in subsidy program for 2026. The new policy shifts from fixed subsidies to a percentage-based model with maximum caps, providing more tailored support across different vehicle price ranges.
New subsidy structure for vehicle replacement
Under the updated policy, consumers who scrap their old vehicles and purchase new ones will receive subsidies calculated as a percentage of the new vehicle’s price:
- For scrapping old vehicles:
- 12% subsidy, up to 20,000 yuan (2,800 USD) when purchasing new energy vehicles
- 10% subsidy, up to 15,000 yuan (2,100 USD) when purchasing gasoline vehicles with 2.0L or smaller engines
- For trading in used vehicles:
- 8% subsidy, up to 15,000 yuan (2,100 USD) when purchasing new energy vehicles
- 6% subsidy, up to 13,000 yuan (1,800 USD) when purchasing gasoline vehicles with 2.0L or smaller engines
| Comparison Dimension | 2025 Policy | 2026 Policy | Core Change |
|---|---|---|---|
| Subsidy calculation method | One-time fixed amount | Percentage of new-car price, with a cap | Switched from flat rate to “price-ratio + cap”, fitting all price ranges |
| Scrappage → NEV subsidy | Flat 20,000 yuan (2,800 USD) | 12 % of purchase price, up to ¥20,000 | Same cap, but now price-linked; lower-priced cars get less, high-priced ones hit the cap |
| Scrappage → ICEV subsidy | Flat 15,000 yuan (2,100 USD) | 10 % of purchase price, up to ¥15,000 | Same cap, but now price-linked |
| Trade-in → NEV subsidy | Up to 15,000 yuan (2,100 USD) | 8 % of purchase price, up to 15,000 yuan (2,100 USD) | Same cap, but now price-linked |
| Trade-in → ICEV subsidy | Up to 13,000 yuan (1,800 USD) | 6 % of purchase price, up to 13,000 (1,800 USD) | Same cap, but now price-linked |
Eligibility requirements
The Ministry of Commerce has specified detailed eligibility criteria:
For vehicle scrapping subsidies:
- Gasoline vehicles registered before June 30, 2013
- Diesel or alternative fuel vehicles registered before June 30, 2015
- New energy vehicles registered before December 31, 2019
The scrapped vehicle must have been registered under the applicant’s name before January 8, 2025.
For vehicle trade-in subsidies:
- The old and new vehicles must be registered under the same individual owner
- The traded-in vehicle must have been registered under the applicant’s name before January 8, 2025
- Sales invoices and registration certificates for the new vehicle must be issued in the same provincial region
Editor’s comment
The shift from fixed subsidies to percentage-based incentives represents a significant policy evolution. While maximum subsidy caps remain unchanged from 2025, the new calculation method means:
- Lower-priced vehicles will receive smaller subsidies than under the previous fixed system. Taking the 2025 best-selling Geely Xingyuan as an example, this car costs approximately 10,000 USD. It could have originally qualified for a scrappage subsidy of up to 2,800 USD or a trade-in subsidy of 2,100 USD. However, under the new subsidy policy, the subsidy is now calculated proportionally based on the vehicle’s price, significantly reducing the subsidy amount by comparison.
- Higher-priced vehicles will still be capped at the maximum amounts. This might mean the policy intends to guide car buyers toward purchasing higher-priced models rather than using subsidies to buy lower-priced vehicles.
- The system now scales subsidy amounts proportionally to vehicle prices, creating a more graduated incentive structure
This approach is part of China’s broader initiative to promote equipment renewal and consumer product trade-ins, which also includes subsidies for household appliances, digital products, and smart home devices.
