Continuing Price War Leads to Second Consecutive Monthly Drop in China’s Car Sales during July

In July, China experienced a second consecutive decline in passenger vehicle sales. Despite discounts and government support, consumers remain cautious about buying cars due to economic uncertainty and a sluggish housing market. This slowdown in demand is a concern for automakers as China’s post-pandemic rebound fades. The China Passenger Car Association (CPCA) reported a 2.6% drop in car sales in July, following a 2.9% decline in June. However, sales for the first seven months of the year were up 1.7% at 11.44 million units. Meanwhile, Chinese automakers are turning their attention to overseas markets, with exports increasing by 63% in July.

Tesla, in particular, is making significant strides in the Chinese market. The company exported 32,862 China-made cars in July, according to CPCA. This has triggered price cuts from other automakers, resulting in intensified competition and further price reductions. Cui Dongshu, the CPCA secretary general, predicts that carmakers will continue to offer discounts in certain segments, and some may even increase their level of discounting. Despite the slowdown in domestic growth, Chinese automakers are still optimistic about their prospects in overseas markets.

Another area of concern is the decline in sales of new energy vehicles (NEVs). NEVs, which include electric vehicles and plug-in hybrids, experienced a 3.6% dip in sales in July compared to June. However, NEVs still accounted for 35.8% of total car sales in July. To boost consumer demand, authorities have implemented measures to stimulate auto consumption, including an extension of the purchase tax break on NEVs until 2027. Nevertheless, Tesla’s market share in China’s EV market fell to its lowest point in nine months, indicating increased competition in the sector.

In conclusion, China’s passenger vehicle sales continue to face challenges due to a hesitant consumer base and economic uncertainties. Automakers are grappling with weakening demand and intensified price competition. Despite these challenges, Chinese automakers are shifting their focus to overseas markets, while also seeking to stimulate domestic demand through discounts and support measures.