China’s NEV sales are on the decline in the wake of the government cutting off subsidies.
Sales of new energy vehicles, or NEVs, in China continue to shrink with sales falling 45.6% in October, according to the China Association of Automobile Manufacturers.
The fall, which is blamed on the end of major subsidies paid to buyers, last month follows a 33% slide in September. The decline is expected to remain until the government reinstates the incentives.
“There is a gap between sales to date and where they were last year, so according to the development trend, we may see negative growth for new energy vehicles this year,” said Chen Shihua, assistant secretary general at China Association of Automobile Manufacturers (CAAM).
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The world’s largest market for electric vehicles, China implemented sales quota requirements for automakers, but supported those mandates with the subsidies. However, in an attempt to get the market running on its own, the government cut the incentives as part of an overall program to reduce the subsidies it doles out.
Despite this, sales were hanging in there through the first nine months of this year, NEV production hit about 888,000, an increase of 20.9% while sales reached 872,0000 units, a jump of 20.8% year-over-year. However, the declines of the last two months are so steep – and expected to continue, offsetting the increases of the first nine months.
China provided subsidies for NEVS, which includes plug-in hybrids, battery-electric vehicles and hydrogen fuel-cell powered vehicles, last year. The result was a 62% spike in sales, despite the overall automotive market in the country falling for the first time in more than two decades.
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The decline is spread across the country’s entire automotive industry. After sales fell in 2018, they are on track to do so again this year. In fact, October marked the 16th consecutive monthly sales decline as the numbers fell 4%, according to CAAM.
Government officials were hoping to be saved somewhat by September and October, which are traditionally strong sales periods in the country. In fact, they are called “Golden September” and “Silver October,” however, September sales were down even further than October, sliding 5.2%.
China’s automotive market has been in a steady decline during the past three years. The country had enjoyed double-digit sales growth as it surged to the title of “world’s largest automotive market,” surpassing the U.S.
However, sales in 2017 rose only slightly. That was followed up by the aforementioned declines in 2018 and this year. A senior CAAM official told Reuters last month sales may drop about 8% to 26 million vehicles this year. The same official said the country was still on track to hit 30 million by 2023 with room to grow.
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The government is looking for that growth. It recently held a series of meeting to see how sales can be boosted, in particular, in rural China where the market is particularly weak, Reuters reported. Potentially, the government may expand the second-hand car market in rural areas and to improve vehicle retirement policies. They also urged firms to develop electric vehicle models that are suitable for the rural market, Reuters reported citing sources familiar with the meetings.