China’s Auto Industry Shifts Gears
Exports Expected to Slow Down
China’s vehicle exports are projected to experience a moderate growth of 5.8% to 6.2 million units this year, a significant slowdown from the 19.3% increase seen in 2024. This decline is attributed to the ongoing impact of additional tariffs imposed by the European Union on China-made electric vehicles (EVs).
A Shift in Focus: Hybrid Exports
In response to the tariffs, Chinese automakers are adapting their strategy by focusing on hybrid exports to Europe. This pivot is evident in the 190% surge in plug-in hybrid exports last year, while EV exports declined by 10.4%. In contrast, EV exports had seen an 80.9% rise in 2023, accompanied by a 47.8% growth in plug-in hybrid exports.
Domestic Sales to Rise
On the domestic front, vehicle sales in China are forecast to increase by 4.7% to 32.9 million units this year, building on the 4.5% rise seen in 2024. The extension of auto trade-in subsidies into 2025 is expected to be a key driver of growth, despite weak domestic demand, intense competition, and external pressure.
New Energy Vehicles to Slow Down
The growth of new energy vehicles (NEVs), which include EVs and plug-in hybrids, is expected to slow down to 24.4% in 2025, compared to 35.5% last year. This deceleration is attributed to the ongoing challenges faced by the industry.
Government Incentives Provide Boost
Government subsidies have played a crucial role in driving sales, with over 6.6 million cars sold in China last year benefiting from incentives of up to $2,800 for NEV purchases and as much as $2,000 for more fuel-efficient combustion engine vehicles. The continuation of these subsidies is expected to provide a much-needed boost to the industry.
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