China new energy vehicle sales drop 34%
Purchases fell for third consecutive month following government cuts to subsidies
New energy vehicle sales in China, the world’s largest car market, fell for the third month in a row as a slowdown in the overall market expands to electric vehicles following cuts in government subsidies.
Sales of NEVs — which include hybrids and fully electric cars — sank 34.2 per cent in September from a year earlier, according to the China Association of Automobile Manufacturers.
Beijing has made expanding China’s NEV market a strategic goal and has provided strong policy and subsidy support to both buyers and manufacturers, sparking a spike in the production of cheap, low-quality electrified cars.
But changes to the subsidy regime, announced in March, that limited support to only a handful of top-performing marques, have raised doubts about the longevity of a number of Chinese electric carmakers.
The Chinese government handed out Rmb22bn ($3.1bn) in subsidies to electric carmakers in 2017, according to statistics from the Ministry of Industry and Information Technology released on Friday. China’s largest bus company, Yutong, and the top global electric car maker by sales, BYD, were the biggest beneficiaries, receiving Rmb4.6bn and Rmb3.6bn respectively.
Nio, once considered a rising star in China’s crowded electric car market, was forced to raise $200m last month from its chief executive and one of its leading shareholders, technology group Tencent, following a disastrous quarter. The company slumped to a Rmb3.3bn net loss in the three months to June, which it blamed on poor demand for its vehicles and services in the slowing market.
The industry slump has deepened in part due to poor consumer sentiment spurred by slowing overall economic growth and Beijing’s trade row with Washington. It has been exacerbated by the absence of expected policy support ranging from the loosening of restrictions on cars in major cities to renewed subsidies for new buyers.
The tough conditions are expected to begin forcing consolidation in the market, analysts say, with the possibility of a number of smaller electric carmakers suffering losses or facing bankruptcy.
Passenger vehicles sales in China have now fallen for 15 consecutive months. According to CAAM, sales of traditional engine cars fell by 5.2 per cent in September — typically an upbeat month for car sales in the country after the end of summer. Monthly sales of NEVs in China fell in July for the first time in more than two years.
Sales growth in China went into reverse in mid-2018 for the first time since the 1990s due to the end of tax breaks for small engine vehicles.