Sales of electric vehicles in China are finally slowing

China’s electric-car market is taking a breather after two years of rapid growth.

Monthly sales of new-energy vehicles (NEV), including battery and hybrids, declined 4.7% from July 2018 to 80,000 units last month, the latest data from China’s biggest auto industry association (link in Chinese) show. The last time the sector posted a monthly decline in sales was in January 2017, when the number plunged 74.4% from a year earlier, as people were waiting for the government to clarify its subsidy policy for the year.

Overall NEV sales as of July this year, however, grew 40.9% from a year ago to 699,000 units, data released yesterday (Aug. 12) from the China Association of Automobile Manufacturers (CAAM) show. CAAM said that it forecasts sales of 1.6 million NEVs this year.

The July sales drop comes as China’s auto sales overall continue to weaken. Monthly sales were down 12.1% to 1.8 million units in July, marking a 13th consecutive month of declines for the broader sector.

The numbers are adding to the unease over China’s sluggish economy as Beijing faces growing challenges on the domestic and external fronts. The EV market, however, is under further pressure as the government has been cutting subsidies to the sector since June. NEV sales in July from BYD, China’s largest electric-car maker, fell 12% to 16,567 units from the same period last year. Sales of NEV passenger car sales, which usually do well for BYD, took the hardest hit. Among them, plug-in hybrid sales declined more than 10% from last July to 6,459 units.

New carmakers like New York-listed NIO $NIO are also suffering due to the slowing auto market. The money-losing company only delivered 837 sports utility vehicles, including its flagship ES8 and newest ES6 models, in July. Though that’s almost double the number from a year ago when the company just started delivering the ES8, the model’s sales only hit 164 last month, nearly 2,900 fewer units than the peak-delivery figure in November. NIO cut subsidies to its ES8 models by a third on average after Beijing’s new subsidy policy went into effect.

Correction Aug.21: July was the 13th consecutive month of sales declines in China’s auto market. The article earlier said it was the 12th.

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