Woofun AI reports that on June 22, the State Council Information Office convened a press conference where multiple departments simultaneously unveiled three pivotal policies reshaping China's automotive landscape. The Ministry of Commerce, alongside several partners, introduced reforms for automobile circulation, consumption, and after-sales market development, while the Ministry of Industry and Information Technology (MIIT) and the Ministry of Public Security announced measures to optimize vehicle certification information sharing. These initiatives collectively address the entire vehicle lifecycle, spanning purchase, usage, circulation, and scrapping, marking a decisive departure from previous short-term stimulus tactics aimed solely at boosting new car sales. The strategic pivot aligns with fundamental market shifts, as domestic data confirms the industry has transitioned from a phase of rapid growth driven by first-time buyers to one dominated by existing vehicle transactions.

Market fundamentals have deteriorated for new vehicle sales since 2026, with data compiled by Woofun AI showing a clear downward trend. From January to May 2026, nationwide automobile sales totaled 12.207 million units, representing a year-on-year decline of 4.2%. Passenger car sales specifically fell to 10.318 million units, a decrease of 6.2% compared to the same period last year. The contraction was even more severe in the retail sector, where domestic passenger car sales plummeted to 6.791 million units, a sharp year-on-year drop of 23.8%. The relatively modest decline in overall sales figures was primarily sustained by a surge in export activity. During the same five-month window, automobile exports reached 4.059 million units, surging 63% year-on-year, thereby establishing exports as a critical pillar supporting the industry's aggregate volume.

Structural differentiation within the market has become increasingly pronounced, with new energy vehicles (NEVs) exhibiting a trajectory completely opposite to that of conventional fuel vehicles. Data from the China Association of Automobile Manufacturers indicates that in May alone, NEV sales hit 1.496 million units, up 14.4% year-on-year, while cumulative sales from January to May reached 5.802 million units, a 3.5% increase. Conversely, fuel vehicle sales continued to contract, with April figures showing a staggering 37% year-on-year decline, the lost market share largely absorbed by NEVs. Domestic brands have secured a commanding advantage in this electrification transition; in the first five months of 2026, the market share of Chinese-branded passenger cars surpassed 70% for the first time, reaching 71%.

In this evolving environment, the three-year-old policy of exchanging old vehicles for new ones has emerged as the primary stabilizer for new car consumption. As of June 22, 2026, this initiative had facilitated the purchase of new cars for over 21 million individuals, with an average subsidy of 14,000 yuan per vehicle. This single policy accounted for 63% of the total 5 trillion yuan sales volume generated by the national consumer goods trade-in program, proving to be the most effective measure in terms of market impact. From an industrial standpoint, the exchange policy directly supported the consumption of more than 12 million new energy vehicles, significantly driving up their penetration rate. In 2025, the penetration rate of new energy passenger vehicles in China stood at 53.9%, an increase of 18.2 percentage points compared to the pre-policy baseline of 2023.

The demand for vehicle exchanges has now superseded initial purchases as the main engine of growth for the new car market. In 2025, retail sales of passenger cars in China reached a record 23.74 million units, with more than 40% of these transactions benefiting from the exchange subsidy. This data underscores a fundamental shift in growth logic: whereas the industry previously relied on the demographic dividend of new users, current demand is increasingly derived from the replacement of existing fleets. For automakers, the cost-effectiveness of acquiring new customers is diminishing, making the provision of superior services for existing owners and a deep understanding of vehicle replacement cycles the critical determinants of future competition.

Beyond financial incentives, procedural optimizations are being implemented to streamline the car purchase experience. The MIIT and the Ministry of Public Security jointly introduced a mechanism for real-time sharing of vehicle certification information, enabling the entire process from purchase to license issuance to be completed on the same day. Officials estimate this reform will benefit over 20 million new car buyers annually, effectively eliminating the historical bottlenecks of long waiting periods and redundant multi-departmental procedures. Simultaneously, efforts to penetrate lower-tier markets continue through initiatives like the 'Thousand Counties, Ten Thousand Towns' consumption season and the promotion of NEVs in rural areas. These measures have extended charging and after-sales service networks to county and township levels, addressing long-standing service deficits and unlocking remaining growth potential in these regions.

The policy framework has shifted from chasing short-term sales spikes to strengthening a growth model driven by vehicle exchanges through improved demand support and operational efficiency. This approach is more sustainable and better aligned with the operating principles of a mature existing vehicle market. If the transformation of the new car market represents the visible symptoms of industry change, then the enhancement of used car and scrap recycling systems constitutes the foundation for self-sustaining development. In 2025, the national trade volume of used cars exceeded 20 million units for the first time, and the ratio of new car sales to used car trade volume approached 1:1, a significant shift from the 0.6:1 ratio seen just a few years prior. This evolution was driven by the continuous relaxation of circulation policies, including the cancellation of cross-regional movement restrictions, the implementation of cross-provincial transaction registration, the optimization of tax costs via 'reverse invoicing,' and the establishment of a national used car information query platform to resolve trust issues.

Entering 2026, the used car market has demonstrated remarkable resilience against economic cycles. Data from the China Automobile Circulation Association reveals that from January to May 2026, the national trade volume of used cars reached 8.0948 million units, a year-on-year increase of 2.3%, with a total transaction value of 531.373 billion yuan. While the new car market faced declines, the used car sector achieved positive growth, highlighting its stabilizing role. Cross-regional transaction activity also intensified, with the national transfer rate of used cars reaching 31.46% in May. Compared to mature global markets where used car trade volumes typically far exceed new car sales, China's recent crossing of the 1:1 threshold suggests considerable room for further expansion.

On the downstream end of the supply chain, the scrap recycling system is undergoing rapid expansion and upgrading. In 2025, the national recycling volume of scrapped vehicles reached 9.8 million units, a figure 4.7 times higher than in 2020. By the end of 2025, there were 1,996 scrap vehicle recycling enterprises nationwide, with more than 75% possessing the capability to dismantle new energy vehicles. The exchange policy alone drove the recycling of over 8 million old vehicles, resulting in the circular utilization of nearly 10 million tons of renewable resources.

Concurrently, efforts are intensifying to improve the recycling of new components like power batteries, with special campaigns targeting illegal recycling activities to drive the system toward greater precision and standardization. Enhanced efficiency in circulation and recycling will accelerate the vehicle renewal cycle, providing a continuous source of demand for exchanges and delivering long-term benefits that far outweigh the transient impact of individual subsidies.

The development of the after-sales market represents the most significant growth potential within this policy round. The announcement of new after-sales policies and the designation of 40 pilot cities for automobile circulation and consumption reform mark the transition from top-level design to practical implementation. These 40 cities, selected by eight departments including the Ministry of Commerce, have established distinct reform priorities based on local industrial characteristics. Beijing focuses on automobile modification, intelligent connectivity, and classic vehicles; Hangzhou and Shenzhen are exploring optimizations to vehicle purchase restrictions; Baoding is centering on automobile events; Yangzhou is promoting RV camping development; and the Xiongan New Area is innovating automobile rental models to serve inter-city commuting needs. The pilot programs will also investigate innovative areas such as bonded automobile modification, 'bonded + exhibition' models for classic vehicles, and insurance frameworks for 'separation of vehicles and batteries.' The pilot programs will also investigate innovative areas such as bonded automobile modification, 'bonded + exhibition' models for classic vehicles, and insurance frameworks for 'separation of vehicles and batteries.'

Compared to the 1.0 version of the policy in 2023, the current 2.0 iteration covers six major areas: automobile modification, RV camping, classic vehicles, maintenance and insurance, automobile events, and automobile leasing. It encompasses 17 specific measures designed to rectify previous shortcomings in industry management systems and standards. Industry data highlights the immense potential of this sector; the global automobile after-sales market has already exceeded 1 trillion US dollars, with the Asia-Pacific region projected to become the world's largest regional market by 2026. In China, the proportion of passenger cars with an average age exceeding 7 years has surpassed 50%, signaling a period of rapid growth for after-sales services. The cultural and consumption driving force was evident at the 2026 Shanghai F1 Grand Prix, which attracted 230,000 spectators, 16% of whom were international visitors.

The essence of these policies is a strategic shift from 'purchase management' to 'use management.' With 370 million vehicles currently in use in China, services, culture, and entertainment activities related to vehicle usage are poised to become the next trillion-dollar growth area.

However, the maturation of the after-sales market will not occur overnight; it requires the simultaneous establishment of standards, talent pools, and cultural infrastructure. The true test lies in the industry's long-term operational capacity rather than the logic of short-term profit generation. The series of policies implemented on June 23 focuses not on using strong stimuli to boost immediate sales but on removing institutional barriers throughout the entire industry chain through comprehensive reform. The demographic dividend associated with new users is shrinking, and current growth is increasingly driven by the replacement of existing vehicles combined with efficiency gains from streamlined processes. For automobile companies, the declining cost-effectiveness of acquiring new customers means that providing excellent services for existing owners and mastering the vehicle replacement cycle will likely define the key to future competition.