China's NEV market may contract this year due to subsidy cut: industry association

FILE PHOTO: A carrier trailer transports newly manufactured cars at a port in Dalian, Liaoning province, China May 21, 2019. REUTERS/Stringer/File Photo

BEIJING/SHANGHAI (Reuters) - Fewer new energy vehicles (NEV) could be sold in China this year than in 2018, an official at the country’s biggest auto industry association said on Monday, as customers hold back on purchases following a government decision to cut subsidies.

Chen Shihua, assistant secretary general at China Association of Automobile Manufacturers (CAAM), made the comment on Monday after the association reported that sales of NEVs fell 45.6% in October from year-ago levels, following a 33% decline in September.

“There is a gap between sales to date and where they were last year, so according to the development trend, we may see negative growth for new energy vehicles this year,” he said.

China has been a keen supporter of NEVs and has implemented sales quota requirements for automakers. But it cut subsidies for NEVs this year as part of an overall plan to reduce subsidies, making the vehicles costlier.

Prior to the subsidy cut, the market for NEVs - which include plug-in hybrids, battery-only electric vehicles and those powered by hydrogen fuel cells - had been a bright spot, having jumped 62% last year.

While NEVs sales rose last year, the world’s largest auto market suffered its first contraction since the 1990s last year.

The trend has remained discouraging with auto sales falling for a 16th consecutive month in October, declining 4% from the same month a year earlier, and followed declines of 5.2% in September and 6.9% in August, CAAM said. September and October, known as "Golden September, Silver October" by China's auto insiders, are regarded as the high season for sales, with customers traditionally returning to make purchases after the summer. The decline in sales during the high season has dealt a blow to industry executives' hopes for a turnaround in the second half of this year. As recently as three years ago, automakers had enjoyed double-digit annual growth in China. But the prolonged sales decline has made domestic car makers from Geely 0175.HK to Great Wall 601633.SS lower their expectations for sales and profit.

Reporting by Yilei Sun and Brenda Goh; Editing by Muralikumar Anantharaman and Simon Cameron-Moore