China is the largest market for overall new passenger car sales (petrol/diesel engines and NEVs), but total sales have been falling for several quarters due to the economic slowdown and US-China trade war, note the analysts. Sales fell by 16% in Q2 2019. Despite the decline, the key highlight of China’s automotive market in recent times has been the increased availability and sales of NEVs.
“The Chinese government has supported car-makers that manufacture NEVs. This has resulted in a much greater choice of consumer vehicles in China than anywhere else in the world,” said Jason Low, Senior Analyst at Canalys. “The government has made many NEVs built in China exempt from purchase tax, set car-makers ambitious NEV production targets, made it easier for buyers to obtain a license for a NEV than for a traditional vehicle, and given buyers financial incentives in the form of subsidies to purchase NEVs. These steps have produced excellent results.”
“But a significant slowdown is coming,” noted Low. “Customer subsidies for NEVs have recently been slashed as the government shifts focus to hydrogen fuel cell electric vehicles and refuelling stations. The impact of the subsidy cut is already being felt. Leading NEV car-maker and battery supplier BYD has recently cut its 2019 sales forecast. The slowdown will put immense pressure on Chinese NEV start-ups, such as NIO, while Tesla will sense an opportunity and stands to benefit from its vehicles now being exempt from purchase tax in China.”