China relaxes policy on lending for new energy vehicles

By Glenn Dyer | More Articles by Glenn Dyer

China has relaxed its policy on lending for personal-use new energy vehicles (NEVs) as part of an effort to stimulate consumption and from Thursday, new buyers will be able to buy without making a downpayment.

The new policy released on the website of the central bank – The People’s Bank of China – on Wednesday means that from now on (There was no cut off date reported) consumers will be not have to make a down payment on their purchase of an NEV passenger car for personal use.

The loan requirements for commercial and used vehicles remain unchanged.

News of the radical changes in vehicle financing came as unofficial data showed a pick up in NEV sales from January and February in March, but a massive, near 30% slump from December’s record 1 million plus level.

The cuts to deposits (and elimination in the case of NEVs) is on top of government subsidies for NEV purchases which were reintroduced a year ago after ending in December 2022. The new subsidies will run until 2027, though there will be a gradual reduction in the later years.

At the same time, Tesla revealed on Thursday that it is offering an interest free loan for three or five years for a limited time with a limited downpayment.

It's the first time in six years, that China's central bank has ordered cuts to car loans terms to try and continue driving sales – this time its focused on spurring more sales of NEVs – battery and plug-in powered vehicles.

That there’s no change to deposit requirements for ICE vehicles (internal combustion engine), means the government is happy to see their sales wither on the vine.

The new policy replaces the terms set in 2017 by the government and central bank. That policy set the maximum loan ratio was 80% for traditional-powered vehicles used for personal purposes and 85% for personal-use NEVs.

The dramatic change to financing NEVs reflects their strong sales growth, which is starting to come under pressure from ‘range anxiety’ uncertain consumer confidence and the intensifying price war which is seeing car buyers delay purchases in the hope of getting a cheaper deal in the near future.

With price cutting happening in US and Europe and uZK markets for electrified vehicles, the slowing growth in their sales suggests buyers in those markets are also starting to shy away from committing themselves to a purchase. It’s one of the downsides to an intense price war.

The PBoC said financial institutions are being told to reduce or waive default penalties arising from early loan closure during the auto trade-in process to support reasonable auto consumption demand.

"Financial institutions can independently determine the maximum percentage of loans for conventionally powered vehicles and new energy vehicles (NEVs) for personal use based on the borrower's creditworthiness and repayment ability, according to the announcement from the People's Bank and its government regulator, the National Financial Regulatory Administration.

For commercial conventionally powered vehicles, the maximum loan ratio is 70%, and for commercial NEVs the maximum ratio is 75%. For used cars, the maximum loan ratio is 70 percent.

The move is aimed at increasing financial support for auto consumption, promoting auto trade-in, and stabilizing and expanding auto consumption, the announcement said.

China’s previous policy was released in November 2017 with the maximum loan ratio was 80% for traditional-powered vehicles used for personal purposes and 85% for personal-use NEVs.

Meanwhile figures released on Thursday suggested that NEV sales rebounded strongly in March from the holiday-impacted dip in February.

Preliminary figures from the China Passenger Car Association (CPCA) showed retail sales of passenger NEVs in China totalled 698,000 units, up 28% from the same month last year and up 80% from February, according to preliminary data.

As impressive as those gains are, March’s figure pales when compared with the 1.08 million NEVs (excluding exports) that were sold last December. Incouding exports the total was close to 1.2 million units.

Cumulative retail sales of passenger NEVs so far this year totalled 1.758 million units, up 34% from a year earlier.


Meanwhile, Tesla is starting to offer loan deals in China to boost sales, even as it continues to cut and increase prices, a situation that must be confusing interested consumers.

Tesla announced on its Weibo channel on Thursday that is offering a limited-time finance policy with down payments as low as RMB 79,900 ($US11,040) and consumers can take advantage of zero percent interest loans.

Customers who buy a Tesla vehicle directly can enjoy a zero-interest loan for up to three years. If customers purchase a Tesla vehicle through an old car trade-in, they can take advantage of a zero-interest loan for up to 5 years, according to Weibo,

This is the first time Tesla has offered a zero-interest loan deal n China.

In March the company had Chinese customers in China who bought already-produced Model 3s and Model Ys vehicles, loans at rates as low as 1.99% per year.

Tesla delivered 386,810 vehicle worldwide in the first quarter, down 8.5% year-on-year and down 20.1% from the fourth quarter of 2023, according to figures it released this week.

That's the first time since the second quarter of 2020 that Tesla's global deliveries have seen a year-on-year decline, and well below analysts' estimates of 449,080 units. 

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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