Soon after China announced a 520 billion yuan ($72.3 billion) package of tax breaks for new energy vehicles (NEVs) in June, sales reached a record high for the country’s leading EV players.
BYD sold over 253,046 vehicles, almost double the number of vehicles it sold in June last year. Li Auto delivered over 32,500 vehicles, achieving 150% growth from a year ago. And while Tesla does not release country-specific figures, the American car brand reportedly sold 93,680 made-in-China EVs in June, up 18% year over year (YoY).
China’s goal of having at least 50% of new car sales be NEVs (pure-electric, plug-in hybrid, and range extenders) by 2035 will be closer to reality with the reintroduction of subsidies. Through this plan, all NEV sales will continue to receive tax exemption in 2023. NEVs purchased between 2024 and 2025 will be exempt from purchase tax amounting to as much as 30,000 yuan ($4,175) per vehicle, while those bought between 2026 and 2027 will benefit from half of this exemption amount.
According to the China Association of Automobile Manufacturers (CAAM), 25.6% of the 26.86 million vehicles sold in 2022 were electric vehicles, making China the world’s largest market for EVs. EV sales among passenger vehicles have already increased by 29% YoY in the first quarter of 2023. With this, the market for traditional gasoline-powered vehicles is expected to deteriorate further as the demand for NEVs is anticipated to soar with the rebate rebound.
For automakers that have not yet embraced EVs or have a dearth of NEVs in their lineup, this is also an indication of danger. Mitsubishi has already announced to quit the Chinese market due to poor sales, Nissan is also considering to begin exporting cars it manufactures in China due to a lack of demand for ICE cars there, whereas Toyota having fired over 1000 workers in China is also suffering from a massive decline in sales.
In addition to NEVs, China is also the world’s biggest market for luxury vehicles having witnessed a huge uptick in sales. According to a Knight Frank report, the Chinese mainland’s millionaire population (in dollars) is expected to cross 17 million by 2026, almost double the 9.2 million millionaires recorded in 2021. And this growth in high-net-worth individuals will show in the sales of luxury cars as the country returns to normalcy post-pandemic.
As for 2023, the CAAM has predicted that China’s auto market will grow 3% over 2022 with an anticipated sale of about 27.6 million vehicles.
A computer animation professional with over 23 years of industry experience having served in leading organizations, TV channels & production facilities in Pakistan. An avid car enthusiast and petrolhead with an affection to deliver quality content to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com