In Depth: Trade-In Programs Spur Sales, but Not Without Costs

Apple Inc. attributed its first quarterly sales growth in Greater China in nearly two years, reported for the June quarter, to the expanded national trade-in program in China. This government initiative aims to stimulate consumption and this year broadened both product eligibility and subsidies, now covering everything from household appliances and electronics to automobiles. New products such as microwaves, water purifiers, smartphones, and tablets are included. Under this program, consumers can receive subsidies of 15% or 20% on the price of home appliances (capped at 2,000 yuan or $280) and 15% off digital devices such as smartphones (capped at 500 yuan) [para. 1][para. 2][para. 3][para. 4]. Car buyers benefit as well: selling an old car for an electric vehicle earns up to 15,000 yuan in subsidies, while conventional vehicles receive a maximum of 13,000 yuan. Scrapping an old car yields even higher subsidies, up to 20,000 yuan for an electric vehicle and 15,000 yuan for a conventional one [para. 5].

In the first five months of the year, 54.3 billion yuan in subsidies for new car purchases drove 557.4 billion yuan in sales, a subsidy-to-sales ratio of 1:10.3, compared to 1:6.7 for digital products and 1:5.1 for home appliances [para. 6]. To facilitate this expansion, the Chinese government allocated 300 billion yuan in ultra-long treasury bonds—double the allocation from 2024—and some regions supplement this with local funds [para. 7].

Despite spurring sales, the program is seen as a double-edged sword. While it boosts demand, it favors larger, better-funded companies, squeezing out smaller manufacturers who cannot subsidize sales upfront before government reimbursement. Industry insiders note the program may also exacerbate China’s ongoing auto price wars by reinforcing consumer expectations for persistently low prices and incentivizing production of cheaper vehicles [para. 8][para. 9][para. 10][para. 23].

On the manufacturer side, the trade-in scheme has been especially effective for higher-end products. For example, Skyworth expects Mini LED TV sales to exceed 10 million units in 2025, up from under 1 million in 2022. Hisense credits the subsidies for increased sales of its higher-end appliances, reflected in a 20%+ increase in average selling price in 2024 and 11% in Q1 2025 [para. 12][para. 13]. There has been a dramatic uptick in sales for highly energy-efficient TVs, with a year-on-year rise of 863%. Smartphone sales above $600 grew 11% in H1 2025, and the proportion of such sales rose to 28% from 26% the previous year. High-end tablets and smartwatches enjoyed similar booms, and 90% of PC subsidies went toward models priced above 5,000 yuan [para. 14][para. 15][para. 16][para. 17][para. 18][para. 19][para. 20].

Yet, the strong focus on premium products benefits large firms disproportionately, as they have the capital to front subsidies before reimbursement. Smaller firms, especially in Zhejiang province, struggle to compete and sell subsidized products. Industry experts suggest revising the subsidies to safeguard small and midsize enterprises [para. 21][para. 22].

While the program has supported sales thus far, its effect appears to be waning. Car sales in 2025 aligned with seasonal averages, not exceeding expectations, and smartphone shipments surged initially but plateaued quickly. Market insiders caution that, given China’s fixed automotive market size, the withdrawal of these subsidies could lead to a sharp sales decline [para. 27][para. 28][para. 29][para. 30][para. 31][para. 32][para. 33]. The allocation and deployment of subsidies by local governments are also inconsistent, impacting product demand and supply chain stability. A third batch of 69 billion yuan in subsidies was announced for August, with more planned for October [para. 38].