China has made a bold move to stimulate consumption and boost sales of new energy vehicles (NEVs) by relaxing its policy on lending. Starting Thursday, new buyers will be able to purchase NEVs without making a downpayment, according to a new policy released by the People’s Bank of China.
The new policy only applies to personal-use NEV passenger cars, while loan requirements for commercial and used vehicles remain unchanged. This move comes as unofficial data shows a pick up in NEV sales in March, following a significant slump in December.
In addition to eliminating the need for a downpayment, the Chinese government has also reintroduced subsidies for NEV purchases, which will run until 2027 with a gradual reduction in later years. Tesla has also joined the effort to boost sales by offering interest-free loans for three or five years with a limited downpayment.
This marks the first time in six years that China’s central bank has ordered cuts to car loan terms, with a focus on spurring sales of NEVs. The move reflects the growing pressure on NEV sales due to factors like ‘range anxiety’, uncertain consumer confidence, and an intensifying price war in the market.
Financial institutions are now being encouraged to reduce or waive default penalties for early loan closure during the auto trade-in process to support auto consumption demand. The new policy replaces the terms set in 2017, with maximum loan ratios now determined based on the borrower’s creditworthiness and repayment ability.
Despite the challenges, NEV sales rebounded strongly in March, with retail sales totaling 698,000 units, up 28% from the same month last year. Tesla’s new loan deals in China aim to further boost sales, as the company continues to adjust prices to attract consumers.