China Names 40 Cities for Auto Circulation Reform Pilot
China’s Ministry of Commerce (MOFCOM) on May 26 released the proposed list of 40 pilot cities for the Auto Circulation Consumption Reform program, marking a major policy push to stimulate the world’s largest automotive market. The selected cities — including Beijing, Shanghai, and Chengdu — will experiment with reforms spanning second-hand car sales, vehicle modification, auto racing events, RV camping, and scrappage recycling, according to Xinhua News.
Background and Policy Context
The pilot program builds on a framework established in January 2025, when MOFCOM and seven other government departments jointly issued the “Notice on Carrying Out Auto Circulation Consumption Reform Pilot Work.” The initiative was further elevated in March 2025 when the Central Committee of the Communist Party of China and the State Council issued the “Plan for Boosting Consumption Special Action,” which explicitly called for extending auto consumption chains.
China’s automotive sector is a cornerstone of the national economy. In 2024, new car sales reached 31.44 million units (up 4.5% year-on-year), second-hand car transactions hit 19.61 million units (up 6.52%), and scrappage vehicle recycling surged 70.7% to 7.87 million units, as reported by Interface News. By the end of 2025, China’s total vehicle ownership had reached 366 million units, according to Ministry of Public Security data.
Five Pillars, Sixteen Directions
The reform pilot encompasses five major tasks: stabilizing and expanding auto consumption, promoting efficient second-hand car circulation, fostering automotive culture, improving end-of-life vehicle recycling systems, and enhancing digitalization of auto circulation and consumption. These are further broken down into 16 key reform directions, including auto modification, intelligent connected vehicle promotion, classic and traditional cars, auto racing events, car rental, RV camping, and optimization of car purchase restrictions.
A MOFCOM spokesperson said the ministry will “deeply advance the auto circulation consumption reform pilot, covering areas such as auto modification, second-hand car circulation, auto racing events, pickup trucks entering cities, and RV camping, to smooth the entire chain of auto consumption.”
City-Specific Focus Areas
Each pilot city has been assigned distinct focus areas aligned with local strengths:
- Beijing Shunyi: Intelligent connected vehicle promotion and classic/traditional cars
- Shanghai Jiading: Classic and traditional cars
- Hangzhou, Zhejiang: Optimizing car purchase restrictions and building a comprehensive auto circulation consumption reform demonstration zone
- Hefei, Anhui: Integrated auto production-sales management service model
- Xi’an, Shaanxi: Second-hand car circulation, focusing on transaction facilitation, online management systems, and new energy vehicle (NEV) used car inspection and valuation technologies
- Qingdao, Shandong: RV camping, leveraging its mountain-sea landscape to cultivate a “car camping base +” diversified integrated business format
- Shaoxing, Zhejiang: Auto culture, aiming to build a world-leading auto culture-themed consumption cluster
- Yangzhou, Jiangsu: RV camping as a new business format
Local governments have already begun responding with detailed plans. The Xi’an Commerce Bureau stated that over the next two years, the city will focus on “innovating transaction registration facilitation measures, exploring online transaction management systems, cultivating branded dealership enterprises, and breaking through new energy vehicle second-hand inspection and valuation technologies.” The goal is to create a market environment where people can “buy with confidence and sell with peace of mind.”
Industry and Expert Reactions
Luo Lei, Vice President of the China Automobile Dealers Association, noted that China’s massive vehicle fleet provides enormous development potential for the second-hand car market. “In the past, most second-hand car dealers only acted as ‘movers,’ but now mainstream dealers have scaled up their after-sales service, with some companies offering an additional 2-year warranty, effectively dispelling consumer concerns about second-hand car quality,” he said.
The China Automotive Strategy and Policy Research Center described the pilot as “of great significance for promoting the prosperity and development of the auto market, driving innovation in the auto circulation system, meeting consumers’ diverse needs, optimizing car purchase restrictions, promoting the standardized development of the second-hand car market, and promoting high-quality development of the auto aftermarket.”
Analysis and Outlook
The pilot program signals a structural shift in China’s automotive policy — from a singular focus on new car sales to nurturing a comprehensive auto ecosystem covering the full lifecycle of vehicles. With 366 million vehicles on the road, the automotive aftermarket — including modification, rental, racing, and RV camping — represents a massive untapped consumption frontier.
However, challenges remain. Implementation outcomes may vary across 40 cities with different local capacities. The second-hand car market has long suffered from trust issues, and building consumer confidence will require sustained regulatory effort. Additionally, RV camping and auto racing require significant infrastructure investment that may not be immediately available in all pilot cities.
As China’s auto market shows signs of cooling — January 2026 auto sales fell 3.2% year-on-year — this reform pilot represents a timely effort to unlock new growth drivers. The coming months will reveal how effectively these 40 cities translate policy ambition into tangible market transformation.