China Allocates $3 Billion to Scrap Old Trucks, Boost EV Freight

China will allocate 22 billion yuan (approximately US$3 billion) in ultra-long-term special treasury bonds this year to support the scrapping and replacement of old commercial trucks, with priority given to upgrading to new energy heavy vehicles, the Ministry of Transport announced on Tuesday.

Cai Tuanjie, Director of the Transport Service Department and Chief Safety Officer of the Ministry of Transport, revealed the funding at a State Council Information Office press conference, stating that the program marks the third consecutive year of dedicated central government support for old truck replacement under the nation’s “two new” policy framework for large-scale equipment upgrades and consumer goods renewal, as reported by Xinhua News Agency.

Program Scope and Subsidy Details

The 2026 program, formally established through a joint notice by the Ministry of Transport and the National Development and Reform Commission (NDRC) on April 28, covers China III and China IV emission standard commercial trucks — including diesel and natural gas vehicles. This marks the first time China IV trucks have been included, significantly broadening the eligible vehicle pool.

Subsidies are available in three categories:

• Scrapping only: Up to 45,000 yuan per heavy truck
• Scrapping plus new purchase: Combined subsidies available, with new energy trucks eligible for up to 95,000 yuan in purchase subsidies on top of the scrapping subsidy — for a maximum combined payout of 140,000 yuan per vehicle
• New purchase only: 35,000 yuan for new energy urban cold-chain distribution trucks

Implementation rules jointly issued by four ministries — Transport, NDRC, Public Security, and Commerce — on May 13 stipulate that electric trucks receive priority support. The program runs from January 1 to December 31, 2026.

Policy Continuity Amid Fiscal Tightening

The 22 billion yuan allocation signals Beijing’s commitment to maintaining green transportation momentum despite broader fiscal pressures. The funding comes from ultra-long-term special treasury bonds, a mechanism China has increasingly used to finance strategic infrastructure and environmental projects without straining regular budgets.

However, the 2026 program operates against a backdrop of gradual policy recalibration. New energy commercial vehicle purchase tax was halved from full exemption starting this year, a change that will continue through 2027. The subsidy program is designed to offset this headwind and sustain growth in the new energy heavy truck market.

Market Context and Industry Impact

China’s new energy heavy truck market has experienced explosive growth since the subsidy program launched in 2024. Sales surged 182% year-on-year in 2025, exceeding 230,000 units, with the penetration rate approaching 30%. Industry analysts at Huatai Securities project approximately 28% growth for 2026, with penetration reaching roughly 37%.

First-quarter 2026 sales reached 43,908 units, up 45% year-on-year, though February recorded the first monthly decline since 2023 — 7,435 units, down 9% year-on-year and 54% month-on-month — suggesting the market is cooling from its breakneck pace.

At maximum subsidy levels, the 22 billion yuan allocation could support the replacement of approximately 157,000 heavy trucks, though actual numbers will depend on the mix of scrapping-only versus combined scrapping-and-new-purchase applications.

Structural Challenges Remain

Despite the generous subsidies, the industry faces significant headwinds. Charging infrastructure remains inadequate for heavy trucks — only about 25% of China’s 21 million charging piles are suitable for commercial vehicles. Drivers face high upfront costs (approximately 500,000 yuan for an electric truck versus 300,000 yuan for diesel), battery degradation concerns, and uncertainty about residual values.

Cold weather performance is another barrier, with 20-30% range loss in winter limiting adoption in northern China. Meanwhile, industry-wide freight rate price wars are eroding the operational cost savings that electrification typically provides.

Regional Adoption and Forward Outlook

Regional implementation varies widely. In Tangshan, Hebei province — a major steel hub — electric heavy truck penetration has already exceeded 40%. Xiamen Port reports its internal electric heavy truck share has surpassed 30%. Xinjiang published detailed implementation rules in June with the maximum 140,000 yuan combined subsidy.

Looking ahead, the central government’s mid-year announcement reinforces policy continuity, but questions remain about whether the program will continue beyond 2026. The current policy covers only this calendar year, and future funding is uncertain. Local governments must cover any funding shortfalls if central allocations are exhausted, creating potential disparities in implementation across wealthier and poorer provinces.

As China pushes toward its carbon peak and carbon neutrality targets, the truck scrappage program represents a critical bridge — supporting the transition to cleaner freight transport while managing the complex economics of one of the world’s largest commercial vehicle markets.