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A year ago, China’s electric vehicle sales grew 126%. Now they’re at 2%

China electric vehicles
Who wants them?
By Echo Huang
Published Last updated This article is more than 2 years old.

The only bright spot in China’s auto market has hit the brakes.

Sales of new energy vehicles (NEVs) were only up 1.8% in May—or 104,000 units— compared with a year earlier, according to data released (link in Chinese) today by the government-backed China Association of Automobile Manufacturers. It’s the slowest growth rate since at least January last year, when China’s annual auto sales fell for the first time since the 1990s.

That’s a big change from May last year, when year-on-year sales rocketed to 126%.

Overall auto sales in May were down 16.4% to 1.91 million units—marking an 11th consecutive month of decline.

The numbers are adding to the unease around the already sluggish economy, which the government has responded to in recent months by rolling out a series of policies hoping to boost demand. In the last weeks alone, the National Development and Reform Commission, China’s state economy planner, has said it will remove purchase limits on NEVs, a category which includes battery electric cars and plug-in hybrids.

Southern cities like Guangzhou and Shenzhen have also announced plans to increase purchasing quotas for all vehicles. This follow years of limits on the number of license plates available to car owners, in a bid to control congestion and pollution in big cities.

At the same time, the country is trying to transition away from electric car sales being state supported. The Chinese government has invested some $60 billion in subsidies and other incentives over the years to cultivate what’s now the world’s largest electric car market. In two weeks, it will be cutting those subsidies by half. That could prompt carmakers to raise prices, potentially further denting sales.

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