China car sales down 38% in January as subsidies, tax cut end

CHINA’S passenger-car sales slumped 38 per cent in January, reversing a 2.4 per cent gain in the previous month, industry data showed on Wednesday (Feb 8), as demand weakened after a tax cut on combustion-engine cars and subsidies on electric vehicles (EVs) expired.

Sales of new-energy cars, which include pure-battery EVs and plug-in hybrids, also fell in January by 6.3 per cent, after a blistering 90 per cent growth in 2022, the China Passenger Car Association (CPCA) said.

“New-energy car sales in January didn’t meet our expectations, with a rare year-on-year decline in a single month’s sales,” said Cui Dongshui, secretary-general of CPCA, on Wednesday.

He added that Chinese New Year and the end of EV subsidies were among the factors that led to the decline.

This January was a quieter one than in previous years, as Chinese people spent an entire week celebrating the New Year holiday.

Despite signs of easing demand in the world’s largest car market, China’s central government did not extend a 50 per cent purchase-tax cut on combustion-engine vehicles when it expired at the end of December.

The government also decided to end a decade-long national subsidy for EV purchases, forcing carmakers, including Tesla, to deepen discounts to defend their market shares.

China’s car market is reliant on various incentives from local governments to encourage purchases.

Meanwhile, Shanghai extended a 10,000-yuan (S$1,956) rebate for those who exchange their oil-based cars for electric ones. The cities of Zhengzhou, Wuxi, Shenyang and Beijing issued coupons for car consumption.

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Tesla sold 66,951 China-made EVs in January, up 18 per cent from December’s number and 10 per cent higher than the figure a year earlier.

The US company’s market share in China’s battery EV sector rose to 12.5 per cent in January from 9 per cent in December, a Reuters calculation showed.

It was the second best-selling EV brand in China last month, after BYD, which shipped 150,164 cars, said the CPCA.

New-energy vehicles accounted for a quarter of the total car sales in the month, down sharply from 35 per cent in November, the data showed. The total number of sales in January stood at 1.3 million. REUTERS