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Auto sales in China showed little growth in March compared to the same period last year, according to data released by the China Passenger Car Association (CPCA).
Passenger vehicle sales stagnated at 1.61 million units, while sales for the first three months fell by 13.4% to 4.33 million.
The figures for new energy vehicles (NEVs), including battery electric cars and hybrids, were much more promising, with a 21.9% rise in sales for March and 34% of total sales for the month.
BYD maintained a significant lead in the NEV segment with a 35.5% market share, with Tesla coming in second place with 14% of NEV sales in China.
The data released on Monday also showed that April's vehicle sales may experience a good recovery after a low base in the corresponding period last year.
The coronavirus pandemic took a major toll on the auto industry, with China imposing strict COVID-19 lockdowns across major cities in April 2022. The pandemic has contributed to falling sales figures for traditional internal combustion engine (ICE) vehicles.
Prices of NEVs have been declining rapidly due to discounting and dropping battery costs, putting more pressure on ICE vehicles and legacy brands behind them.
Tesla started a price war this year, leading over 40 other brands to lower their prices on ICE models to defend their market shares. Companies such as Nissan, Toyota, and Volkswagen have joined the race and recently offered significant discounts to customers.
Local authorities who view the auto industry as a key pillar of the economy have rolled out buyer subsidies to encourage demand, some of which have extended to auto manufacturers to spur manufacturing.
Despite the bright picture for NEVs, the global electric vehicle (EV) market has struggled recently.
Research shows that 672,000 units were sold in January 2023, almost half of December 2022's sales and just a 3% year-on-year increase from January 2022. Among all passenger cars, the market share of EVs tumbled to 14% in January, notably down from the 23% seen in December.
In China, the world's largest EV market, EV sales in January fell by 50% compared to December of the prior year. However, the year-on-year change remained relatively stable due to consumers' affinity for cheaper domestic-made models.
As a result, the Chinese Association of Automotive Manufacturers forecasts a slowing sales momentum this year, predicting a figure of around 8 million EVs.
Sales for Q1 2023 are expected to remain slow. Still, CATL's announcement of a price cut in battery cells for automotive off-takers will likely boost sales again.
The auto industry is still showing positive signs of growth despite recent setbacks. The declining cost of NEVs, competing for consumers' attention with attractive discounts, and government incentives contribute to a healthier market.
Brands wishing to survive in the competitive Chinese automotive industry must keep up with technological advancements in a challenging economic climate.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,