China's electric vehicle market, once on an unstoppable growth trajectory, has hit a speed bump.
New EV sales in the country are down 14 percent year on year, according to data from the China Passenger Car Association.
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The decline is attributed to a slowing economy and reduced government incentives. So far this year, 4.7 million new EVs have been delivered in China.
Subsidy Cuts Bite
Beijing reduced its new-car subsidy by roughly a third this year.
The subsidy, which was 15,000 yuan ($2,220) per vehicle, is now capped at 10,000 yuan ($1,480) or 10 percent of the purchase price.
For the most affordable EVs, the payout has dropped by 5,000 yuan ($740). This has had an immediate impact on sales, particularly for budget models.
Major automakers are feeling the pinch. In July, BYD sold 239,370 vehicles locally, down 9 percent from the same month last year.
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Geely's July sales fell 29.1 percent year on year, though both saw slight improvements from June.
Smaller players like Xpeng, Nio, and Li Auto also reported declines in July deliveries compared to June.
To cushion the domestic slump, BYD and Geely have ramped up exports.
However, for most Chinese EV brands, the home market still accounts for the vast majority of sales.
Analysts at AlixPartners predict that China's overall new car sales will drop by 10 percent to 24.6 million vehicles by the end of 2026.
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The country's GDP grew just 4.3 percent year on year in the second quarter, the slowest pace since late 2022.
