Shares of Chinese EV maker Nio $NIO ( ▲ 3.18% ) climbed Tuesday after Beijing confirmed it will extend its vehicle trade-in subsidy program through 2026, giving the sector a policy lifeline just as investors were bracing for a pullback in government support.
The move removes a key overhang for Chinese EV stocks, which had been facing uncertainty after earlier signals that subsidies for the now-mature EV market could be scaled back.
Beijing keeps the incentives flowing
Under the extended program, consumers can receive up to roughly $2,850 to scrap an older vehicle and purchase a qualifying new energy vehicle. The subsidies are part of a broader consumer stimulus package aimed at boosting spending across big-ticket goods, not just autos.
For EV buyers, the extension matters. It provides visibility into demand support at a time when China’s auto market has shown signs of fatigue, with passenger vehicle sales slipping in recent months despite heavy discounting.
Why Nio and peers reacted fast
US-listed Chinese EV stocks jumped immediately after the announcement, with Nio $NIO leading gains. The subsidy extension helps offset upcoming headwinds, including the partial reinstatement of China’s EV purchase tax beginning in 2026, which will apply to most vehicles after years of exemptions.
For companies like Nio, which are scaling production and launching new models, the policy support helps smooth demand while the industry works through pricing pressure and intense competition.
A floor, not a cure
The subsidy extension does not solve all of the sector’s problems. Sales growth has slowed, competition from domestic rivals remains fierce, and margins are still under pressure. But the policy does provide a floor under demand and buys time for EV makers to adjust.
For now, the message from Beijing is clear: the government is not ready to fully step away from supporting EV adoption just yet.