The End of Electric Vehicle Incentives in China Hits Sales

Car sales in China fell in October for the first time in over a year, amidst the gradual withdrawal of vehicle change incentive programs driven by local governments, adding to the factors that continue to affect demand.

According to data from the China Passenger Car Association (PCA), retail sales of passenger vehicles—including sedans, SUVs, and minivans—fell by 0.8% compared to the same month last year. Excluding the January drop caused by the Lunar New Year holidays, this is the first contraction since August 2024.

During the first ten months of the year, cumulative sales increased by 8.3%, according to PCA figures. However, the end of local vehicle change subsidies threatens to slow the market's pace.

Major provinces and cities, such as Shanghai, have reduced or eliminated incentives that offered thousands of yuan to those scrapping an old car. By October 22, more than ten million applications had been submitted for these programs.

The disappearance of these aids is compounded by structural problems, such as overproduction capacity and a prolonged price war that continues to squeeze manufacturers' margins. Although Beijing has tried to contain this aggressive competition, brands now face the challenge of meeting their annual sales targets without one of the main drivers of demand.

According to PCA Secretary General Cui Dongshu, the prolonged Golden Week holiday in October also influenced the monthly decline. Despite this, the cumulative growth of 8.3% so far this year suggests that the Chinese car market maintains a solid level of activity, albeit with increasing signs of slowdown.

This drop in sales is the latest in a string of bad news for BYD, the largest manufacturer in the Asian country. The company reported a second consecutive decline in its quarterly results after the Chinese government took action against its aggressive discounts, one of the most used tools in its commercial strategy.