China's new EV campaign aims to boost sales after a slowdown

The backstory: China, known as the top dog in the green car game, saw its electric vehicle (EV) sales skyrocket last year by 87% compared to 2021, according to Counterpoint Research. But it seems like its growth mojo is starting to fizzle out. According to the China Association of Automobile Manufacturers, the growth rate from January to May this year dropped to 41%, which is way lower than the 120% it clocked during the same period last year.

On top of that, over 40 car brands in China have jumped on the price-war bandwagon since January. It all began when Tesla started slashing prices for a bigger piece of the EV market. And that caused a chain reaction among EV competitors. In fact, over the past three months until May, 753 different car models, accounting for around 25% of all vehicles out there, had their prices cut by more than 10,000 yuan (US$1,400) or more. This trend has been going strong for a solid seven months straight, according to researchers at China Auto Market.

More recently: Last month, China announced some new measures to get those green machines rolling, especially in rural areas. To do this, it’s ramping up the construction of charging stations and making it easier to buy and use EVs. The government even extended a tax break for people buying these eco-friendly cars. The idea is to give those areas a fresh boost and increase rural tourism at the same time.

The development: China has kicked off a fresh six-month campaign to get more new energy cars on the road, especially in rural areas. You see, the nation wants to give its EV sales a boost since things have been slowing down a bit. So, the Ministry of Commerce is encouraging banks to give car buyers a financial kickstart. Beijing is also rallying local governments and carmakers to chip in with subsidies and discounts to make EVs more tempting. This ambitious initiative covers over 11,000 places, from little villages to big counties across the entire country.

But some details are still a bit fuzzy for now. See, some local governments are dealing with a tight budget, so the exact subsidies in each region are a tad uncertain. But some cities have already blazed the trail, like Nanjing, for instance. It’s had 35 million yuan (roughly US$5 million) in car vouchers ready to roll since June 6. And Shenzhen? The tech hub has already given out around 82 million yuan (about US$11.5 million) in rewards for people snagging clean cars this year.

Key comments:

“This is like mounting a massive advertising campaign for the autos industry,” said Yale Zhang, the managing director for Shanghai-based consultancy Automotive Foresight.

"The aging product line is a real problem for Tesla," said Zhang. "Once BYD and other EV startups follow to lower prices, the effect of Tesla's price cuts could vanish in the blink of an eye."

“The forecast is the latest sign that China’s EV builders might see a strong sales recovery,” said Gao Shen, an independent analyst in Shanghai to SCMP, referring to Chinese EV-maker Nio’s forecast for a jump in deliveries this month. “A rebound in sales by indigenous brands will take place in the second half, when their new models hit the market.”