A weak economy and a month-to-month drop in sales leads to concerns for Chinese auto sector
January presented a mixed picture for China’s automotive sector. While overall sales surged by 47.9 percent compared to January 2023, manufacturers remained cautious as sales fell short of expectations and declined compared to the previous month, marking the first decrease since August.
The nation’s automakers managed to sell 2.44 million vehicles (including exports) last month, which was down 22.7 percent as compared to December 2023. That has analysts on the edge, and suggests that the next 11 months may prove to be difficult for the market.
January was a complicated month for electrified vehicles in particular. Reuters reports that new energy vehicles (which includes, EVs, hybrids, hydrogen, and other technologies) accounted for 29.9 percent of the market’s total sales. That means that the market grew 78.8 percent year-on-year.
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Read: China Will Curb EV Growth Plans Despite Export Sales Booming
Once again, automakers aren’t celebrating. Sales of electric vehicles dropped by 37 percent compared to December, falling well below expectations. Cui Dongshu, the secretary-general of the China Passenger Car Association, noted that EVs have become a drag to market growth. He anticipates that the pricing competition initiated by Tesla will continue throughout 2024.
EVs weren’t the only factor depressing car sales, though. The wider Chinese economy is facing some serious difficulties. The country has experienced an extended downturn in its housing market, and the stock market has reached five-year lows.
That’s slowing demand for new cars, and led companies like Tesla to offer discounts on the Model 3 and Y last month. Meanwhile, many domestic automakers are looking outside of China for relief.
Exports have been a lifeline for the country’s automotive sector, but they aren’t a sure thing either. Friction in markets like Europe, where trade restrictions are being considered, has led China’s commerce ministry to encourage the nation’s automakers to “actively” respond to trade concerns, and to cooperate with foreign companies.