‘Payback’: why China’s world-beating car industry faces plunging sales at home
Chinese car brands have suffered a steep drop in domestic sales this year, with Beijing scaling back subsidies and buyers reluctant to spend
China’s electric vehicle (EV) industry sits at the centre of numerous economic and geopolitical trends: consumer spending, environmental protection, trade policy, high-end manufacturing, technology and more. In this short series, we assess the current state of the sector within these broader contexts. Here, Emma Ma examines the forces driving higher exports and lower domestic sales.
Wang Wenfei, a 30-year-old chef from central China’s Henan province, had long dreamed of buying a new car. So, when he received his annual bonus in February, he decided to splash out as a gift to himself after a decade of hard work at a restaurant in Shanghai.
“A comfortable new car that I can drive home to Henan for Chinese New Year was all I wanted,” he said, setting himself a budget of 100,000 yuan (US$14,700).
However, just weeks later, Wang received an unpleasant surprise: the government had slashed its subsidy for new car purchases by 33 per cent to 10,000 yuan. Meanwhile, petrol prices were rising amid the war in the Middle East – and his employer had declined to give him a pay rise.
Reluctantly, he decided to put his dream on hold.
Wang is far from alone. China is now the world’s largest car exporter, but sales at home have hit the skids in recent months, as the government scales back its subsidy programme and consumers remain reluctant to spend amid a shaky job market and prolonged property downturn.
The trend is creating a headache for Chinese carmakers like BYD and Chery Automobile – pushing them to lean more heavily on overseas markets at a time of rising trade tensions – as well as complicating Beijing’s efforts to rebalance China’s economy towards domestic consumption.