New energy vehicles (NEVs) sales in China, the world’s largest automobile and electric vehicle (EV) market, fell 4% year-on-year to about 1.2 million units in 2019, representing the first decline in ten years following the Chinese government reduction in subsidies announced in June, according to figures from the Chinese Association of Automobile Manufacturers released on Monday.
The country’s auto sales in 2019 also shrank 8.2% from a year earlier to 25.8 million units, dropping for the second year in a row. In 2018, auto sales suffered its first decline since 1990, down 2.8% year-on-year to over 28 million units.
For years, China’s electric automakers have been able to thrive with generous government subsidies, as Beijing ramped up efforts to cut down carbon emissions and pollution, but after authorities announced last year reductions of about 50% in national subsidies for NEVs, including electric vehicles (EVs), and other cars powered by renewable energy like hydrogen fuel and electric hybrids, sales of NEVs slumped for sixth consecutive month in 2019, reaching a 27.4% decrease in December compared to the same month in 2018.
The subsidy slash produced a negative impact on NEV makers and hurt the profitability of the industry, Chen Shihua, deputy secretary-general of China Association of Automobile Manufacturers, said to 36Kr. He also called for governmental support for the development of the NEV sector by rolling out favorable policies in taxation and infrastructure.
Chinese consumers are also concerned about safety incidents involving EVs that took place during the past few months. Three of Nio’s flagship ES8 SUVs caught fire, prompting a voluntary and costly recall of nearly 5,000 vehicles, while other electric cars produced by BYD and Tesla also had burning accidents.
Regulators are still making efforts to boost the NEV sector, according to the minister of industry and information technology Miao Wei. He also said during the China EV100 Forum 2020 on Sunday that the government will not make new significant cuts to NEV subsidies in 2020, despite a reportedly earlier plan to completely phase them out by the end of this year.
China is also pumping hopes into this sector by boosting technological innovation, breakthroughs in EV batteries and in-car operating systems, and improving infrastructure development in hydrogen fuel and driverless vehicles, according to a draft proposal released in December by the Ministry of Industry and Information Technology. The draft also raised the nationwide NEV sales target to 25% of total auto sales in 2025.
Some players are still seeing opportunities amid headwinds. Chinese property firm Evergrande Group announced in November that it will debut its first NEV model Hengchi 1 in the first half of 2020 and start mass production in 2021. The firm will also invest a total amount of RMB 45 billion (USD 6.4 billion) in EVs development in the next three years.
Tesla is also betting big in the Chinese EV market. The US-based premium electric carmaker has delivered the first batch of its Shanghai-made Model 3 last month. It has also announced the launch of the Model Y project, the company’s fifth car to hit the road, which will be assembled in the new Shangai Factory.
36Kr is KrASIA’s parent company.