China’s Car Sales Decline for Third Consecutive Month Despite Government Incentives

China’s car sales continued to decline in June, marking the third straight month of falling figures. This trend persists despite government incentives aimed at boosting consumer demand amid a sluggish economic recovery.

Key Points:

• June Sales Decline: Passenger vehicle sales in June totaled 1.78 million, a 6.9% decrease compared to the same period last year. This decline accelerated from the 2.2% drop in May and the 5.8% fall in April, according to data from the China Passenger Car Association.
• Government Incentives Ineffective: Despite government subsidies for trading in cars introduced in April, the price war that initially boosted sales earlier in the year has become less effective in recent months.
• First Half Sales Up Slightly: Overall car sales for the first half of 2023 were up 2.9% at 9.93 million vehicles.
• Electric Vehicle Sales Hit Record, but Growth Slows: New energy vehicles (NEVs), including pure electric vehicles and plug-in hybrids, accounted for a record 48.1% of domestic car sales in June. However, overall NEV sales growth slowed to 9.9% from 27.4% in May, while sales of plug-in hybrids surged 67.2%.
• Strong Performance by Chinese EV Brands: Chinese electric vehicle manufacturers like BYD, Nio, Zeekr, and Leapmotor all reported record monthly sales in June.
• Exports Rise, but Future Uncertain: Car exports increased by 28% year-on-year in June, compared to a 23% gain in May. However, the future of exports may be impacted by the European Commission’s recent decision to impose import tariffs of up to 37.6% on Chinese-made electric vehicles.
• Tesla Exports Drop: U.S. electric vehicle maker Tesla exported 11,746 Chinese-made vehicles in June, its lowest figure since October 2022.
• Inventory Levels Rise: The China Automobile Dealers Association’s vehicle inventory alert index rose to 62.3% in June, signaling a significant increase in unsold vehicles and reflecting weak consumer demand.

In summary, China’s car sales continue to face headwinds despite government efforts to stimulate demand. The slowdown in new energy vehicle sales growth and rising inventory levels are particularly concerning, suggesting a challenging road ahead for the automotive industry in China.