Do you still remember? Since the fourth quarter of last year, the capital market has been quite pessimistic about the automotive sector, primarily because the subsidy policy for 2026 was uncertain, which in turn made it difficult to predict how car sales would evolve.
It wasn't until the end of 2025 that the new round of subsidy policy was finally announced, instantly sparking widespread discussion. During the New Year holiday, many friends expressed confusion, saying the mechanism of the new policy seemed a bit complicated and hard to understand.
I said: Actually, it's quite simple. The price band of 150,000 to 200,000 RMB benefits the most. One sentence is enough.
If you don't want to overthink it, just remember this conclusion; you're welcome to enjoy the "ready-made" insight. If you're willing to think for a few minutes, then let's elaborate a bit tonight.
First, let's talk about the details of the latest policy, which is divided into two types: scrapping and replacement.
Scrapping means deregistering the old vehicle so it no longer circulates on the market. After scrapping an old car, if the owner wants to buy a new energy vehicle (NEV), the subsidy ratio is 12%, with a maximum of 20,000 RMB. If they want to buy a fuel vehicle, the subsidy ratio is 10%, with a maximum of 15,000 RMB.
At this point, one can easily calculate: 20,000 / 12% ≈ 166,700 RMB; 15,000 / 10% = 150,000 RMB. This means that for NEVs, exceeding 166,700 RMB allows you to get the full subsidy, and for fuel vehicles, exceeding 150,000 RMB gets you the full amount; anything more expensive is essentially a waste.
A picture might make it more intuitive:
Replacement means selling the old car to someone else, allowing it to continue circulating. In this case, if the owner wants to switch to an NEV, the subsidy ratio is 8%, with a maximum of 15,000 RMB. For switching to a fuel vehicle, the subsidy ratio is 6%, with a maximum of 13,000 RMB.
Continuing with a pictorial representation, the most cost-effective points are around 187,500 RMB for NEVs and 216,700 RMB for fuel vehicles.
Then, if we take the "union" of these amounts, whether for scrapping or replacement, the price range where you can get the full subsidy is roughly between 150,000 and 220,000 RMB.
Next, let's look at the differences between the 2026 policy and the 2025 policy.
In words, the biggest difference is that the subsidy form has changed from a fixed amount to a calculation based on a percentage of the new vehicle's price, with an upper limit.
Explained with common sense: last year, regardless of which car model you bought, you received the same fixed subsidy amount. This year, the more expensive the car you buy, the higher the subsidy, up to a point where it essentially reverts to a fixed amount for cars above 250,000 RMB.
Therefore, last year, buying mid-to-low-end cars was definitely the most cost-effective, as the cost after subsidy deduction was very low. This year, mid-to-high-end cars are the most cost-effective, ideally priced exactly to receive the full subsidy. It's like a pass/fail exam; the person who passes with 60 points is happier than the one who scores 100 points.
Let the data speak. Some sell-side analysts have calculated the impact of having no subsidy in Q4 last year versus the new subsidy this year on different price bands. I'll directly share their table:
It might look a bit complicated, but simply put: In Q4 last year, buying an NEV was attractive due to the full exemption from purchase tax, but there was no subsidy. This year, buying an NEV only offers a half-price reduction on the purchase tax, but there is a new subsidy. The key question is whether the subsidy can offset the impact of the purchase tax change.
The conclusion from the table is clear: the price band of 150,000-200,000 RMB has the highest negative comprehensive cost. Since cost is an expense, a negative cost (saving) is positive, meaning it's the most cost-effective option. Meanwhile, looking at the proportion of the vehicle price, the sub-150,000 RMB band is optimal.
So, looking first at this year's subsidy policy, the 150,000-220,000 RMB band benefits the most. Comparing it with last year's policy, where the 0-200,000 RMB band was advantageous in both absolute amount and proportion, and finding the "intersection" of the two, we arrive at the conclusion that the 150,000-200,000 RMB band benefits the most.
There's additional supporting evidence: the Chongqing region took the lead last year in adjusting its policy, shifting from a fixed subsidy to a proportional one. The final result was a significant increase in the sales proportion of models priced at 150,000 RMB and above.
With this explanation, I believe most readers can understand it now.
Moving on, we need to look at the impact on the industry and automakers.
From an industry perspective, it aligns largely with my previous thoughts. Although the total subsidy amount has decreased, a structural change has occurred—an upward shift in the benefiting price band. This price band shift leads to improved profit margins (more expensive cars are generally more profitable), paving the way for high-quality development.
From an enterprise perspective, the focus should be on automakers with a significant number of models in the 150,000-200,000 RMB band. Broadening the range slightly to 100,000-250,000 RMB, traditional automakers include BYD, Geely, Changan, and Great Wall. Among the new automakers, there are XPeng, Leapmotor, NIO Inc., and Xiaomi, etc.
Speaking of which, it's a good time to update the final 2025 performance figures for the 5 frequently tracked new automakers:
The one that achieved the 500,000-unit target was Leapmotor. The rest—XPeng, Li Auto, and Xiaomi—were in the 400,000-unit range (Xiaomi's CEO Lei Jun stated deliveries reached 410,000 units). NIO Inc. lagged slightly behind but showed strong momentum in the second half of the year.
We will continue tracking them in 2026, observing whether they can meet their new targets and how the new subsidy policy impacts these new automakers.
As for the investment dimension, as readers know, I am "doing subtraction" when it comes to整车 (whole vehicle manufacturers). On one hand, competition is fierce and the final outcome is still unclear; on the other hand, it's a tough business with thin profit margins.
However, research requires "doing addition." Considering most new automakers are listed in Hong Kong, it's convenient to use an ETF as a tracking tool. I previously mentioned the HK Connect Auto ETF Huabao (520780), which was just launched at the end of last year. Its top holdings are the core automakers and auto parts companies mentioned in this article. I plan to check its performance monthly going forward.
Alright, that's about it for now. This article is relatively concise, aiming to explain the latest auto subsidy policy in the simplest terms possible. I wonder what the readers think?
