China’s car sales extended a downturn in May that has become a stress test for foreign automakers led by Volkswagen, which is trying to revive its China business through locally developed electric vehicles.
Sales dropped 22.3 per cent from a year earlier to 1.53 million vehicles last month, marking an eighth consecutive month of decline, data from the China Passenger Car Association showed on Monday.
For the first five months, sales were down 19.7 per cent to 7.18 million vehicles.
The prolonged slump has underscored a widening gap between China’s headline economic growth and consumer demand for big-ticket items like cars. While Beijing is targeting economic growth of 4.5 per cent to 5 per cent this year, analysts say auto demand has been hit by weaker consumer confidence, reduced subsidies and a market that is mature after years of rapid expansion.
EV and plug-in hybrid sales, making up 62.2 per cent of the total, fell 7.5 per cent from a year earlier last month, the fifth straight month of declines.
“China’s auto market is already the largest in the world at 23 million to 25 million retail sales annually and car ownership levels are relatively high, especially for an emerging market,” said Eugene Hsiao, head of China equity strategy at Macquarie Capital. “This means the market is already at a mature stage of development.”
Hsiao said he expected China’s total retail auto market to grow at single-digit levels over the next five to 10 years, although leading EV makers could continue to outpace the broader market as penetration rises.
Last month, NIO Chief Executive William Li said China’s auto industry had likely moved past its “golden era,” as domestic demand stagnates even while exports remain strong.
While NIO is still focused on its home market, many of its peers have pivoted to exports.
EV and plug-in hybrid electric vehicle sales abroad rose 112.6 per cent in May from a year earlier, compared with a 74.7 per cent increase in overall car exports.
