Total passenger car sales in China declined in October from a year earlier for the first time in months as trade-in incentives and subsidies for new vehicle purchases are being phased out.
China’s retail sales of passenger cars fell by 0.8% last month from October 2024, per data by the China Passenger Car Association (CPCA) cited by Bloomberg. Compared to September, car sales also dropped, by 0.1%.
Although the declines seem small, they were the first in many months in the Chinese car market. Excluding the effect of the Lunar New Year in January 2025, which typically sees lower sales, China’s passenger vehicle sales fell for the first time since August 2024.
Some densely-populated provinces and cities, including Shanghai, have begun to phase out the trade-in subsidies rewarding consumers for buying new and more efficient cars.
If these subsidies were to be halted, total car sales in mainland China in 2026 are set for the first decline in six years, Nick Lai, head of auto research in Asia-Pacific at JPMorgan, told the South China Morning Post last month.
Incentives have brought demand forward, so car sales next year could be at zero growth in the best-case scenario, while the most bearish one would see a 5% drop in sales if it pans out, according to JPMorgan.
“We expect retail [car] sales to see flat growth next year in a bullish scenario,” Lai told South China Morning Post in an interview last month.
“The market has more than a 50 per cent chance of seeing year-on-year slippage as meaningful demand may have been brought forward.”
Overall Chinese car sales have been supported by incentives this year, but the underlying weakness persists as the government is trying to tackle the overcapacity in the vehicle manufacturing sector, which has led to price wars and losses for many automakers.
Despite the weakness in total car sales, Chinese demand for electric vehicles continues to support global EV sales.
By Tsvetana Paraskova for Oilprice.com
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