China’s Auto Market Slowdown Finally Hits New-Energy Vehicles

June 25, 2019

Trustee Chair in Chinese Business and Economics > Trustee China Hand 

By Scott Kennedy and Mingda Qiu

In some ways China’s new-energy vehicle (NEV) market is the envy of the world. In 2018 over 1.2 million NEV passenger vehicles were sold, and that figure could climb to over 1.7 million in 2019. Equally impressive, the proportion of vehicle sales that are NEVs has been rising over the past few years, from barely 0.1% in 2014 to over 5% now (see Figure 1). Electrification is coming to China’s auto sector more quickly than in any other market in Asia, Europe or North America.

Figure 1: NEVs as Share of Total Auto Sales in China (%)

However, those numbers can be deceiving. China’s automobile industry has slowed down significantly over the last two years. In 2019, the slowdown finally hit the NEV segment. NEV sales in May 2019 were only 2.0% higher than the year before, a drastic drop in the growth of sales (see Figure 2). If China persists in reducing subsidies for NEVs, sales should continue to lag in the second half of 2019 and the overcapacity that exists in traditional cars will be more visible in NEVs as well.

Figure 2: Monthly NEV Sales in China (thousands)

To learn more about the strengths and weaknesses of China’s NEV sector, see the CSIS report, China’s Risky Drive into New-Energy Vehicles (November 2018).

Trustee Chair in Chinese Business and Economics > Trustee China Hand 

Scott Kennedy is Senior Adviser and Trustee Chair in Chinese Business and Economics at CSIS. Mingda Qiu is a research associate with the Freeman Chair in China Studies at CSIS.