China’s NEV market contracts after subsidy cuts

On Monday, an official from China biggest auto industry association stated, fewer new energy vehicles (NEV) are likely to be sold in China in 2019, compared to the previous year, following a cut in subsidies by the government.

The comments made by Chen Shihua, assistant secretary general at China Association of Automobile Manufacturers (CAAM), after the association reported a drop in NEVs sales by 45.6% in October compared to the previous year; in September also, NEV sales dropped by 33%.

“There is a gap between sales to date and where they were last year, so according to the development trend, we may see negative growth for new energy vehicles this year,” said Chen Shihua.

Although China has actively supported the sales of NEVs and has implemented sales quotas for automakers, it has however cut subsidies for them in 2019 as part of an overall plan to reduce subsidies, which has made NEVs costlier.

Although NEVs sales rose in 2018, China’s auto market suffered its first contraction since the 1990s that year.

The trend for auto sales in China has remained low, with auto sales falling for a 16th consecutive month in October 2019, declining 4% from the same month a year earlier.

Incidentally, September and October, known as “Golden September, Silver October” by China’s auto insiders, are regarded as the high season for sales, with customers traditionally returning to make purchases after the summer.

The decline in sales during the high season has dealt a blow to industry executives’ hopes for a turnaround in the second half of 2019.

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