China’s electric vehicle sales are now declining by double digits

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Image: Reuters/Norihiko Shirouzu
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That was fast.

After bucking the trend of declining automobile sales in the world’s largest car market, China’s electric vehicle sales saw their first monthly decline in July. In August, the decline was far steeper, dropping by 16% from a year earlier to 85,000 units.

The back-to-back declines came after China scaled back subsidies to the industry, data today (Sept. 11) from industry group China Association of Automobile Manufacturers showed. China’s overall auto sales, meanwhile, in August saw the 14th consecutive drop since July 2018, falling to 1.65 million units.

The market started the year on a high—it grew at the galloping rate of 138% in January—but then turned turbulent as China announced the removal of subsidies for EV manufacturers. A jump in sales in June as consumers made purchases before possible price increases was followed by a decline of 4.7% in July.

China’s auto market is suffering in the face of a sluggish economy, worsened by a trade spat with the US. Beijing will resume a rate of 25% tariffs (link in Chinese) on imported American cars from Dec. 15, a move that will affect Teslas, the most popular American EVs in China. Tesla’s aiming to start producing cars from its new Shanghai Gigafactory before that.

But the performance of domestic manufacturers offering far more affordable cars than Tesla hasn’t been great either. BYD, the world’s biggest EV manufacturer and a bellwether for sales in China, reported its second monthly sales declines earlier this week—it saw sales in August drop 23% from a year ago in the same period.

Sales of fossil fuel cars also saw a short-lived surge in June, after many local governments brought in new stricter emissions standards for cars earlier than expected. As a result, dealers offered older cars at deep discounts.