"As new car growth slows, we must look for incremental gains in 'vehicle usage.'"
Following the release of two policy documents by China's Ministry of Commerce, Lang Xuehong, deputy secretary-general of the China Automobile Dealers Association, told Gasgoo that as the industry enters a stock phase, growth in production and sales is converging. Relying solely on new cars to drive growth is narrowing the space. "Mining service needs during the vehicle lifecycle is the viable path to stabilize domestic demand and achieve long-term consumption expansion."
On June 23, the Ministry of Commerce, alongside multiple departments, released two documents: one identifying 40 pilot cities for auto circulation and consumption reform, and another outlining 17 measures across six sectors—modification, RV camping, classic cars, maintenance and insurance, motorsports, and car rental.
The policies work in tandem: the first addresses "how to swap and circulate vehicles," while the second tackles "how to use and maintain them."
In Lang's view, this combination marks a shift in Chinese auto consumption from a "one-off transaction" to "full lifecycle service."
40-City Pilot Launches to Get Old Cars Moving
First, the eight-department pilot in 40 cities. Per Ministry requirements, the pilot adopts a "one city, one policy" approach, allowing localities to define their focus based on industrial base, consumption volume, and location advantages, avoiding a blanket approach.
Five directions are clear: optimize purchase and driving restrictions to free up new energy consumption in big cities; remove hidden barriers to cross-regional used car circulation and simplify transfers; improve incentives for scrapping old vehicles and regulate recycling and battery reuse; integrate auto consumption with tourism and sports; and pilot supporting businesses like smart connectivity, rentals, and racing.
Why such a drastic overhaul of circulation? The root cause is simple: if old cars don't sell, new cars take a hit.
Vice Minister Sheng Qiuping noted in June that China's auto parc has reached 370 million units, with ownership per 1,000 people rising to about 378. Sales have ranked first globally for 17 years, making China a bona fide auto giant. But it also means the market has entered a stock-dominated phase—most buyers are replacing existing cars.
Over the past decade, purchase tax cuts, local vouchers, and replacement subsidies have rotated in and out. While they boost sales short-term, the side effects are severe: demand gets overdrafted once policies end, especially in the new energy sector. Crucially, these stimuli focused on "buying new," leaving the chronic issues of blocked used car circulation unresolved.
The data speaks volumes: factoring in the 2026 halved purchase tax for new energy vehicles, domestic passenger car retail sales slid 6.2% year-on-year to 10.31 million units in the first five months. NEV sales dropped 19.7% over the same period. Relying on subsidies to force growth is proving increasingly ineffective.
To stabilize the industry, stimulating the used car market is essential. Do the math: with 370 million existing cars, if even 5% of owners trade in this year, that generates nearly 20 million units of new demand. If unleashed, that increment is enough to prop up a good half of the Chinese market.
Yet the reality is, swapping out an old car is far from easy for most.
Despite national orders to lift regional bans on used cars, many cities continue to block them via emission standards or hidden entry thresholds. Selling is a hassle, plagued by opaque vehicle history, odometer tampering, and concealed accident damage. Meanwhile, inspection standards vary, and transfer procedures remain complex.
Image source: FAW-Audi
Consumers fear being ripped off whether buying or selling, dampening market activity. CADA data shows used car transactions in 2025 were less than 70% of new car sales. Contrast that with the US, where the used-to-new ratio consistently exceeds 230%—meaning two used cars are sold for every new one.
Lang's assessment is blunt: "Reforms that are hard to implement nationally can be piloted first. Once replicable models are formed, they can be expanded nationwide, drastically reducing the cost of institutional trial and error."
Smooth used car circulation would directly stimulate replacement demand, converting trade-ins into new orders. That is the pilot cities' most immediate short-term effect. Long-term, the goal is to build a complete chain—"new sales, used circulation, old car scrapping"—turning the stock cycle into endogenous power for the market, rather than relying on policy crutches.
Six Sectors Open Up, Moving the Aftermarket from Chaos to Order
If the 40-city pilot solves "how cars flow," the 17 measures answer "how cars are enjoyed."
The domestic aftermarket can be summed up in three words: big, messy, stifled. With 370 million cars on the road, the market potential is measured in trillions. Yet niche demands like personalized modification, RV travel, and classic car collecting are suppressed by regulatory bottlenecks and industry disorder.
In mature markets like the US and Europe, aftermarket revenue accounts for over 50% of the auto industry—business after the sale exceeds the sale itself. In China, most consumption remains stuck on basic maintenance like oil changes and tires. Personalized, cultural, and experiential consumption is nascent.
Image source: Jetour
The 17 measures target six specific sectors to turn this around.
For modification, the policy clarifies two things: defining compliance boundaries with a list of allowed changes, and streamlining filing procedures for registration changes. It also proposes establishing a subcommittee for vehicle modification under the National Standardization Technical Committee to accelerate standards. With safety redlines fixed and personal needs given an outlet, Lang believes "relaxing modification restrictions will release significant market demand."
RV camping faces three bottlenecks: inconsistent registration standards, driving restrictions, and a severe shortage of campsites. The policy streamlines registration and traffic rules, simplifies land approval for campsites, and requires public parking lots to include RV spots and supply facilities.
For classic cars, the policy defines recognition standards, inspection rules, road conditions, and circulation norms. It encourages auctions, exhibitions, collecting, and retro racing, while developing parts remanufacturing and vehicle restoration. Essentially, this transforms old cars from a "grey zone" into "circulatable cultural assets."
On maintenance and insurance, consumer pain points are clear: are parts OEM? How are labor fees calculated? Is there unnecessary repair? The policy mandates disclosure of maintenance tech info, parts traceability, and penalties for fraudulent repairs. In insurance, the exploration of a "vehicle-battery separation" model aims primarily at transparency.
Image Source: Shanghai International Automotive City
In motorsports, the policy proposes simplifying event approvals, building a multi-tier racing system, and promoting "racing + tourism" integration. This effectively lowers the barrier to entry and provides a clear commercial route for the racing economy.
Car rental is a sector Lang emphasizes. She notes that rental companies need funding to expand and renew fleets; the policy supports this via interest subsidies. "Fleet expansion and faster renewal by rental firms will drive new car purchases, supplementing the lackluster private buying demand."
The underlying logic of these six sectors is to decompose "vehicle usage" from simple transport into diverse consumption scenarios—personalization, leisure, culture, and competition. Each scenario extracted extends the industrial chain deeper and widens the boundaries of consumption.
As new car growth plateaus, a regulated aftermarket will become one of the most critical sources of incremental revenue for OEMs, parts suppliers, and service providers. The first to stake a claim gets the cake.
Two-Way Linkage Between Circulation and the Aftermarket
Releasing both policies on the same day was a calculated move in top-level design.
The 40-city pilot addresses the physical lifecycle: from purchase, use, and trade-in to used car circulation and scrapping. The 17 aftermarket measures tackle value extraction during use: modification, camping, racing, rental. These behaviors span the entire usage cycle, creating a service-level consumption loop.
Together, they build a new chain of "buying—swapping—using—enjoying." Lang argues that among the pilot's five directions, rental, camping, and racing interact with the 17 aftermarket measures. Pilots provide the scene and policy support; aftermarket measures enrich the pilot's content. They act as mutual amplifiers.
Image Source: Shanghai International Automotive City
The 40-city pilot covers more ground than the 17 measures. Beyond overlapping areas like rental and racing, the pilot extends into dismantling, smart vehicle promotion, and optimizing purchase restrictions in restricted cities—areas not explicitly detailed in the aftermarket file but open for exploration in pilot cities.
Take motorsports: the pilot encourages racing-tourism fusion, while aftermarket policy simplifies approvals. With dual policy support, the institutional cost for organizing an off-road event—from venue approval to operations and tourism traffic—drops significantly. The same applies to RVs: simplified land approval plus standardized facilities shifts RVs from "affordable to buy but hard to use" to "buy, use, and play."
The deeper industrial reform lies in two "breakthroughs."
First, connecting stock and increment. Poor used car circulation and low willingness to trade in drag down new sales. By removing trade-in barriers, the pilot gets stock moving; flow generates replacement demand, which converts to new orders. This is one of the most effective ways to drive growth in a stock market.
Second, linking basic and derived consumption. Previously, a car's economic contribution peaked at purchase. With aftermarket policies opening up modification, racing, and camping, a car generates continuous spending—on parts, tickets, camp fees, rental services—throughout its life. The car shifts from a one-time transaction product to a value-generating carrier over its lifecycle.
The takeaway is clear: past industry competition hinged on launch speed and pricing advantages. Going forward, the core will shift to long-term user retention and deep operational service capabilities.
Rebuilding Competitive Logic: From Selling to Operating
The profound value of this policy mix isn't in short-term sales boosts, but in reshaping the competitive logic of China's auto industry—shifting from pure sales volume rivalry to full lifecycle user value operation.
For the past decade, domestic competition was a grind of pricing and spec stacking. OEMs relied on new car margins, squeezed by price wars. Dealers tied their fortunes to new vehicle gross profits, leaving them vulnerable to cycles. The aftermarket remained fragmented and chaotic. This model, dependent on new car growth, has hit its ceiling as the market matures.
The dual policies open a new path for the industry.
For OEMs, the opportunity lies in abandoning the "sale is the end" logic. By building official used car programs to capture trade-in value, launching compliant official modification lines to bring the grey market into the fold, and developing RV-specific models for travel scenarios, they can turn stock users' second and third purchases into new profit streams—offsetting the margin erosion from price wars.
Image Source: NIO
Dealer groups must move away from over-reliance on new car sales. A business mix combining used cars, compliant modification shops, rental operations, camping support, and chain maintenance can smooth out cyclical fluctuations. If a dealer can offset a 20% drop in new car profits with a 15% gain from aftermarket business, they gain the resilience to weather cycles.
For aftermarket service providers, the keywords are standardization, chaining, and branding. Entering niche tracks like compliant modification, precision repair, classic restoration, event management, or camp operations under the policy framework allows them to build user trust and brand barriers through standardized service.
Local governments also have an opportunity to build distinct industrial labels using the pilot policy—creating racing industrial parks, camping clusters, or classic car cultural districts. This fuses auto consumption with tourism and sports, expanding consumption while building city brands.
Image Source: Lynk & Co
Challenges, of course, remain. Aftermarket regulation means rising compliance costs; small shops surviving in the grey zone will face consolidation. Dealer transformation requires upfront capital for certification systems, modification bays, and fleet procurement. OEMs entering official modification and classic car restoration need to restructure R&D and supply chains—unlikely to yield quick results.
From an industry view, policy opens the space, but market players must explore the business models. Those who crack the code first will seize the first-mover advantage; those who wait risk missing the window.
As the industry enters the aftermarket era, new cars are merely the entry point; the existing stock is where the real value lies. Completing the switch from a "selling mindset" to a "user operations mindset" is key for every industry player to stand firm in the next stage of competition.
For every participant in the supply chain, this is both a policy bonus window and a signal to transform. Stepping out of the new car price war and laying out in circulation, aftermarket services, and full lifecycle management is the true barrier to surviving the cycles ahead.
