In 2026, with the full implementation of the ‘trade-in’ policy, the ageing of the vehicle fleet and the automotive industry’s transition towards new energy vehicles, older vehicles are driving a profound structural shift in the demand for automotive parts through two pathways: ‘phasing out’ and ‘life extension and maintenance’. The specific drivers and impacts are as follows:

I. Pathways for phasing out vehicles: Accelerating the scrapping of old vehicles to drive demand for ‘replacement’ and ‘remanufacturing’

1. Policies are driving the phasing out of older vehicles, unleashing demand for ‘replacement’ and ‘scrapping’: the 2026 vehicle trade-in scheme (such as subsidies for scrapping petrol vehicles manufactured before 2013 and new energy vehicles manufactured before 2019) has accelerated the withdrawal of high-age, high-emission vehicles from the market. This has led to a reduction in the stock of older vehicles, resulting directly in a precipitous decline in aftermarket demand for low-value-added, high-emission components (such as conventional engines, gearboxes and intake and exhaust systems) designed for older models; some original equipment manufacturer (OEM) parts are facing supply shortages, whilst aftermarket parts are facing depreciation.

2. A surge in the number of vehicles being scrapped has fuelled demand for ‘remanufactured parts’ and ‘used vehicle components’: a large number of older vehicles entering formal scrapping and dismantling channels has driven demand for the remanufacturing of the ‘five major assemblies’ and core components (such as remanufactured engines and gearboxes), as well as for reused parts from dismantled vehicles. As these remanufactured parts offer excellent value for money and align with green and environmentally friendly trends, they are in high demand both for repairs carried out by vehicle owners at their own expense and for stock held by retailers.

II. Approaches to Extending Vehicle Lifespans: As older vehicles enter a phase requiring extensive maintenance, this drives demand for both ‘essential repairs’ and ‘upgrades and modifications’

1. The ageing vehicle fleet is driving demand for ‘essential repairs’: the average age of passenger cars in China has now exceeded seven years, meaning vehicles are entering a ‘high-maintenance phase’. As the failure rate of older vehicles rises, this is fuelling demand for the replacement of frequently used wear-and-tear parts such as engine oil, brake discs, batteries and shock absorbers, as well as for repair parts for systems such as the chassis and electronic control units; this demand remains stable in lower-tier cities and emerging markets.

2. The transition to new energy and smart technology is driving demand for ‘upgrades and modifications’: some nearly new or older vehicles in reasonably good condition require inspection, servicing and refurbishment before entering the second-hand car market, which in turn drives demand for the replacement of related components. At the same time, as automotive consumption shifts towards ‘self-indulgence’ and ‘scenario-based’ preferences, owners of older vehicles are increasingly seeking personalised upgrades such as smart cockpits, driver-assistance systems and exterior modifications (e.g. car wraps, window films and alloy wheels), thereby driving demand for related electronic components and aftermarket parts.

III. Industrial spillover effects: The shift in demand structure towards ‘more electricity, less oil’ is driving the restructuring of the components supply chain

1. Surge in demand for new energy vehicle components: As older fossil-fuel vehicles are phased out and the rate of replacement with new energy vehicles increases, demand for components specific to new energy vehicles—such as the ‘three-electric’ systems (batteries, electric motors and electronic control units), high-voltage wiring harnesses and thermal management systems—is soaring, leading to greater certainty regarding orders for high-value components.

2.Supply Chain and Channel Restructuring: The phasing out of older vehicles and the switch to new energy vehicles are driving the components industry to transition towards new energy solutions, remanufacturing and digitalised supply chains. Capacity for low-value-added traditional components is being rapidly phased out, whilst demand for high-value-added, intelligent components is being channelled upstream.