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The backstory: China's influence in the global auto sector, particularly in electric vehicles (EVs), has been a standout trend. In 2022, about a quarter of passenger vehicles sold in China were electric or hybrid, highlighting the nation's commitment to greener mobility. But a recent shift in this landscape has caught everyone's attention. According to a report from the China Association of Automobile Manufacturers, the growth rate in EV sales, which was a strong 120% during the same period last year, dropped to 41% from January to May this year.
This shift is partly because of fierce competition among automakers, with Tesla leading the charge by starting a price war earlier this year by repeatedly slashing prices on its cars. That led to over 40 other automakers also cutting prices by more than 10,000 yuan (US$1,400) on 753 different car models over the past few months. At the same time, Chinese EV manufacturers are also venturing into foreign markets to combat increasing domestic competition.
More recently: In May and June, the Chinese government rolled out a set of measures to supercharge EV adoption, especially in rural areas, including speeding up the construction of EV charging stations, making it easier to buy and use EVs and extending tax breaks for eco-conscious car buyers. The idea was to boost rural economies and also kickstart rural tourism.
The development: China's passenger vehicle sales made a comeback in August, showing year-on-year growth for the first time since May. According to data from the China Passenger Car Association (CPCA), car sales increased by 2.2% in August compared to the previous year, reaching 1.94 million units. The sales also jumped by 8.5% compared to July, showing a significant momentum build-up. Over the first eight months of the year, sales grew by 1.8%, totaling 13.38 million units.
Tesla, the electric vehicle (EV) giant, played a big role in this. Thanks to some significant discounts, Tesla's share of China's EV market nearly doubled in August, going from 7.5% in July to 13.2%. The numbers back this up too. In August, Tesla sold 64,694 cars in China, and their China-made Model Y hit 65,316 deliveries, outperforming other passenger vehicle models.
Meanwhile, as domestic growth slows down, Chinese automakers are increasingly looking abroad for expansion. Exports surged by 31% in August compared to the previous year, following a 63% increase in July. Also, new energy vehicles (NEVs) continue to be a driving force in China's auto market. In August, NEV sales soared by 34.5%, making up 36.9% of total car sales. Notably, sales increased by 11.8% in August compared to July.
“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 in June. “A rebound in sales by indigenous brands will take place in the second half when their new models hit the market.”
“I believe the time has come for Chinese brands,” BYD chairman Wang Chuanfu said at a BYD event earlier this year. “It’s an emotional need for the 1.4 billion Chinese people to see a Chinese brand becoming global.”
"The aging product line is a real problem for Tesla," said Yale Zhang, managing director at Shanghai-based consultancy Automotive Foresight. "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."