After years of expansion, new energy vehicle (NEV) sales in China have stalled. Annual deliveries are expected to remain flat to last year’s, according to a report by a leading Chinese investment bank released on Tuesday.
Why it matters: China has bet big on NEVs as a strategically important industry but prospects for the sector look uncertain after government subsidies were slashed and sales have dropped off.
- China surpassed the US to become the world’s largest NEV market in 2015 when sales surged more than three-fold to hit 330,000 units.
- The country’s NEV sales have fallen sequentially for three consecutive months beginning in July, while year-on-year rates of decline have deepened from 4.7% in July to 34.2% in September.
- The latest slide is “deeper than previously thought,” wrote analysts Wang Lei and Feng Wei at China International Capital Corp (CICC) in the report.
Detail: CICC has lowered its forecast for China’s 2019 NEV sales by 100,000 units to 1.2 million to 1.3 million.
- CICC attributed the prolonged slump to consumer unwillingness to buy NEVs. Many have been put off by a spate of vehicle fires that took place over the summer.
- While automakers have worked hard to boost battery range this year, consumers are still not biting. The average energy density for batteries has increased by one-fifth to 145 watt-hours per kilogram in the past nine months.
- Consumers have also been drawn away from NEVs by stimulus measures and new incentives for traditional gasoline-powered automobile purchases, part of government efforts to rally the market.
- Authorities in Guangzhou and Shenzhen have eased restrictions on new license plates, allowing a total of 180,000 additional plates to be issued over an 18-month period that began in June.
- The two commercial hubs in southern China make up close to one-fifth of the country’s NEV sales and accounted for 15.1% of total sales in August, a significant drop from 28.5% in May, the CICC report said citing government figures.
- The twists and turns in the NEV sales indicate that the development of the market and technology “could not be achieved overnight.”
Context: Some analysts remain bullish on the prospects of an imminent market rebound as the selling season in China’s auto sector kicks in.
- BOC International last week posted expectations of improved sales for the fourth quarter, adding that the sector “remains valuable in the long term” given the rising trend of vehicle electrification in the global auto industry.
- Huajin Securities expects market growth to resume in the fourth quarter to boost annual sales volume to 1.3 million to 1.4 million for the full year.
- The China Association of Automobile Manufacturers in July lowered its sales projection to 1.5 million and 19.4% year-on-year growth from a previous forecast of 1.6 million made late last year.