China’s passenger vehicle sales experienced a decline for the second consecutive month in July, despite efforts to boost demand through discounts and government support measures. The China Passenger Car Association (CPCA) reported a 2.6% decrease in car sales, totaling 1.79 million units compared to the previous year. This follows a 2.9% drop in June. However, sales for the first seven months of the year saw a 1.7% increase, reaching 11.44 million units.
As the Chinese economy struggles with a post-pandemic slowdown, automakers are concerned about a potential demand slowdown. The country’s domestic growth has eased, leading Chinese automakers to focus more on overseas markets. In July, exports surged by 63% year-on-year, following a 56% increase in June.
The intensifying rivalries in China’s automobile market, the largest in the world, have contributed to weakening demand and increased price competition. Tesla’s price cuts at the beginning of the year triggered discounts from over 40 brands in China, including General Motors and Volkswagen, who joined a fresh round of price reductions in July. Experts expect carmakers to continue offering discounts and potentially increase discounting in certain segments.
New energy vehicles (NEVs), which have been driving China’s auto sales growth, also experienced a decline in July. Sales of NEVs, including pure battery electric vehicles (EVs) and plug-in hybrids, were up 31.9% compared to the previous year. However, they recorded a 3.6% decrease in sales from June to July. To revive sluggish consumer demand, authorities implemented measures to boost auto consumption in June, including extending a purchase tax break on NEVs until 2027.
Tesla, which is preparing its Shanghai plant for production of the new Model 3, exported 32,862 China-made cars in July, according to the CPCA. Despite this, Reuters calculations based on CPCA data showed that Tesla’s market share in China’s EV market fell to the lowest in nine months, with 31,423 cars sold in July.
The decline in China’s passenger vehicle sales reflects the challenges faced by the world’s second-largest economy as it grapples with an economic slowdown and a slump in the housing market. Automakers will need to navigate the uncertain economic conditions and continue to adapt their strategies to sustain growth in the Chinese market.
