According to industry data, new car demand weakened as a result of the expiration of a tax cut for cars with combustion engines and subsidies for electric vehicles (EVs). As a result, China’s passenger car sales fell by 38% in January, reversing a gain of 2.4% in the previous month. The China Passenger Car Association (CPCA) reported that sales of new energy vehicles, such as pure battery EVs and plug-in hybrids, decreased by 6.3% in January following a blistering 90% growth in 2022.
Cui Dongshu, secretary general of the CPCA, stated in an online briefing on Wednesday that new energy car sales in January 2023 did not meet their expectations, with a rare year-over-year decline in sales. According to Cui Dongshu, the decline was caused in part by the Lunar New Year and the end of EV subsidies.
Since Chinese people celebrated the Lunar New Year holiday for an entire week during the month, January was quieter than previous years. China’s central government did not extend the 50% purchase tax cut for vehicles with combustion engines when it came to an end at the end of December, despite indications that demand was decreasing in the largest car market in the world.
It also decided to end a national subsidy for EV purchases that had been in place for more than a decade. As a result, automakers like Tesla had to increase their discounts in order to maintain their market shares. The automobile market in China is more dependent on various government incentives to encourage purchase.
While the cities of Zhengzhou, Wuxi, Shenyang, and Beijing issued coupons for the use of automobiles, Shanghai offered a rebate of 10,000 yuan, or $1,470, to individuals who switched to electric vehicles from those powered by gasoline. In January, Tesla sold 66,951 EVs made in China. That was up 10% from a year earlier and up 18% from December. A Reuters calculation indicates that it increased its market share in the battery electric car industry in China from 9% in December to 12.5% in January 2023.
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