China’s car sales slump 6.9% in June despite government incentives

China’s car market experienced a sharp decline for the third month, with sales falling by 6.9% in June compared to the previous year. This drop reflects ongoing struggles in boosting consumer demand despite government incentives aimed at revitalizing the economy.

In June, passenger vehicle sales reached 1.78 million units, worsening from a 2.2% decline in May and a 5.8% drop in April, according to data from the China Passenger Car Association (CPCA).

Earlier in the year, a price war initiated in 2023 had temporarily boosted sales, but its impact has waned. Even new government subsidies for car trade-ins, announced in April, have not significantly reversed the downward trend.

For the first half of the year, China’s car sales saw a modest increase of 2.9%, totalling 9.93 million vehicles. Notably, sales of new energy vehicles (NEVs), which include pure electric vehicles (EVs) and plug-in hybrids, hit a record 48.1% of domestic car sales in June.

Leading the charge in NEV sales, Chinese EV giant BYD and newer companies like Nio, Zeekr, and Leapmotor achieved record monthly sales. However, overall growth in EV sales slowed to 9.9% from 27.4% in May, while sales of plug-in hybrids surged by 67.2%, up from a 61.1% increase the previous month.

China’s car exports also saw an increase, rising by 28% year-on-year in June, compared to a 23% gain in May. However, this upward trend may face challenges following the European Union’s decision to impose provisional import tariffs of up to 37.6% on Chinese-manufactured EVs.

“New energy vehicle exports currently face temporary pressure,” remarked CPCA secretary general Cui Dongshu. NEV exports rose by 12.3% year-on-year in June but decreased by 15.2% from May, making up 21% of total car exports, down 3 percentage points from the previous year.

In light of the EU’s tariffs, U.S. electric carmaker Tesla saw exports of its China-made EVs drop to their lowest level since the third quarter of 2022, when operations at its Shanghai factory were heavily disrupted by COVID-19 lockdowns. Europe remains the largest export market for Tesla’s Shanghai-produced EVs.

Reflecting the weak consumer demand, the vehicle inventory alert index, compiled by the China Automobile Dealers Association, jumped by 8.3 percentage points year-on-year to 62.3% in June.

Read more on Toyota partners GAC to launch self-driving EV in China by 2025