China’s marketplace for new energy vehicles posted a strong rebound in June, industry data showed, leading an auto sector turnaround as cash subsidies and tax cuts, part of a wider push for economic stabilization, helped incentivize consumers.
The domestic automobile sector has recovered from its April low, data from the China Association of Automobile Manufacturers (CAAM) showed on Monday, mirroring an economic upturn at large since May.
Domestic auto production hit 2.5 million in June, an increase of 28.2 percent from the year prior, while auto sales jumped by 23.8 percent year-on-year to slightly over 2.5 million, according to CAAM numbers.
New energy vehicle production and sales, both recording a surge of 130 percent in June from the year before, led the turnaround.
Specifically, pure electric vehicles (EVs), plug-in hybrid EVs, and fuel cell EVs all saw noticeable gains over the past month, with pure EVs and plug-in hybrid editions seeing a more pronounced rise overall.
By comparison, the auto market recorded sales of 1.86 million in May, down 12.6 percent year-on-year whereas up 57.6 percent on a monthly basis. New energy vehicle sales gained 105.2 percent year-on-year over May, CAAM figures showed.
The association attributed the upturn to a full recovery in the country’s virus-hit auto supply chains since June. Automakers have accordingly ramped up production to make up for their losses over previous months.
Moreover, the government’s decision to halve the purchase tax for small-engine vehicles, adding to already-present cash subsidies for new energy vehicle sales across localities, turns out to have added fuel to consumers’ willingness to purchase vehicles.
At the end of May, the Ministry of Finance and the State Taxation Administration announced a halving of the tax from ten to five percent for passenger vehicles (excluding value added tax) that are priced at no more than 300,000 yuan ($44,635.56) and with engines of 2 liters or less. The tax reduction took effect on June 1 and will be in place until the end of the year.
The tax incentive was unveiled among a number of measures mandated by the State Council, the country’s overseeing cabinet, to stabilize the economy. The 33-measure policy package encapsulates efforts on fiscal and monetary fronts and highlights a slew of incentives to steady investment and boost consumption.
Within the first month since the tax incentive came into force, the country cut a total of 7.1 billion yuan in purchase taxes, involving roughly 1.1 million vehicles, the Xinhua News Agency revealed on July 4.
Doubling down on a push for car purchases, which is often a reliable source of consumption recovery amid lackluster home sales, local governments across the country have raced to subsidize new energy vehicle purchases with cash rebates.
For instance, the Beijing municipal government announced early June that consumers who purchase new energy vehicles from local dealers and have the cars licensed locally would be granted subsidies of no more than 10,000 yuan apiece. The subsidy will be effective until the year end.
In the case of Shenzhen in South China’s Guangdong Province, local new energy vehicle purchases will be entitled to subsides to the tune of 20,000 yuan until June 30, 2023.
Understandably, the new energy vehicle market, in particular, staged a conspicuous comeback throughout June, in line with an overall economic rebound.
The official Purchasing Managers’ Index, a precursor economic activity, has so far recovered to 50.2 after the month of June, swinging back to the expansionary territory after staying below the 50 mark for three consecutive months, according to figures from the National Bureau of Statistics. The upward trend is seen as a consolidating reversal since May as the economy hit a bottom in April amid domestic Omicron flare-ups and the repercussions of the flare up of violence in Ukraine.
The corresponding auto recovery was more evidently shown by the Friday data announcement by the China Passenger Car Association (CPCA), another major domestic auto industry trade body.
The new energy passenger vehicle market scaled a fresh record high in June, with BYD’s pure EVs and plug-in hybrid models beefing up homegrown brands’ leadership.
Sixteen carmakers reported wholesale numbers of more than 10,000 units last month, an addition of three from the previous month and an increase of 11 from the year before, per CPCA data, accounting for 85 percent of the total in terms of new energy passenger vehicle deliveries.
BYD blazed the trail with a wholesale number of 133,762 units in June, followed by Tesla China’s 78,906. Unsurprisingly, newer EV brands such as XPeng, NETA, Li Auto, NIO, Leapmotor and WM Motor all showed good results with decent sales numbers in both monthly and yearly terms.
Second-tier brands including NETA and Leapmotor were singled out by the CPCA as among the brightest sales stars, buoyed by their footholds in niche market segments.
Looking ahead, the CPCA expected auto sales to moderate in July compared with June, factoring in a typical off-season for vehicle purchases. Nonetheless, the trade association still described this month as perhaps the best time for a vehicle purchase as locally tailored incentives are set to expire and industry-wide promotions routinely taper off before September.