Feb 21, 2022 07:14 AM EST
China NEV Sales Fall 18.6% in January as Subsidy Cuts for Electric Vehicles Take Effect in 2022

Data from the China Association of Automobile Manufacturers (CAAM) showed sales of new energy vehicles (NEVs) in China dropping by 18.6 percent month-on-month in January, a direct result of the country slashing subsidies for NEVs by 30 percent in the year 2022.

According to Cui Dongshu, Secretary-General of industry body China Passenger Car Association (CPCA), the total sales jumped in December of last year because buyers rushed to buy new energy vehicles ahead of the government enforcing a subsidy cut in the new year.

Sales of new energy vehicles soared in December 2021 with 518,000 units sold in China, a massive 159.5 percent increase compared to its numbers during the same period the previous year. In January, the total number of units sold for NEVs, including hydrogen fuel-cell, electric, and plug-in hybrid vehicles, stood at 431,000, representing an increase of 135.8 percent year-over-year.

Subsidies help NEV sales soar in China

In recent years, China has been aggressive in pursuing and developing electric vehicles to promote high-tech industries and reduce vehicle emissions. Those initiatives have paid off with sales of electric vehicles in China growing tenfold since 2014, even overtaking the numbers in the United States. However, the strong growth for EV sales has been dependent on the country's generous subsidy policy, which allows electric vehicle start-ups to lower prices in the market.

However, China has made it clear that the subsidy-led growth model for electric vehicles cannot be sustained in the long term. Chinese authorities decided to cut subsidies to local electric vehicle makers this year to encourage them to rely on innovation instead of government support as the industry becomes more mature.

New energy vehicles account for 13.88 percent of total car sales in China, with 2.88 million units sold in 2021. According to the China Electronic Chamber of Commerce data, 82 percent of the total sales of NEVs last year came from electric vehicles.

China has set an ambitious target for NEVs, with its State Council wanting its share to account for 20 percent of total new car sales in China by 2025, as per the South China Morning Post. When the year 2035 arrives, the target is for NEVs to account for the majority of new car sales in China.

Also Read: Benefits of Maintaining Your Car's Interior (+ Expert Tips)

Tesla, Xpeng, and Li Auto produced strong sales in January

Tesla, the only foreign carmaker among the top ten best-selling NEV brands in China, produced impressive numbers in January. Elon Musk's company sold 59,845 China-made vehicles to start 2022, a 286.5 percent increase year-over-year.

Xpeng's sales also went up in January, selling 12,922 vehicles for a 115 percent year-over-year increase. Li Auto, which sells extended-range EVs in China, sold 12,268 vehicles last month, representing a year-over-year increase of 128.1 percent. Nio was the worst-performing brand among the three Chinese EV makers, selling just 9,652 vehicles in January for a disappointing 33.6 percent annual increase.

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