Worst yet to come for China’s slumping car market, as coronavirus pandemic takes its toll
- Extension of new-energy vehicle subsidies and tax breaks by two years unlikely to boost market: industry observers
- Tesla’s locally made Model 3 electric car only bright spot for sector
The world’s largest automotive market is poised for a third year of declining sales in 2020, as the Chinese government’s incentives and tax breaks fail to convince buyers to make large financial commitments during a global economic slump and the coronavirus pandemic.
The State Council, China’s cabinet, announced on Tuesday it will extend subsidies and tax breaks for new-energy vehicle purchases by two years to boost the sluggish market. Current subsidies of up to 25,000 yuan (US$3,531) per vehicle and exemption from a 10 per cent purchase tax for buyers will be extended until 2022. Both policies were expected to be axed this year.
“Consumers were expecting an increase in subsidies … this [extension] will have a limited impact on the market,” said Tian Maowei, sales manager at Yiyou Auto Service in Shanghai.
China’s economy in 2020 is poised for its slowest growth rate in four decades, after the coronavirus, which has sickened 83,059 people and claimed 3,305 lives, forced production and services to shut across the country for two months. Even as the country’s manufacturing and overall economy creaks back into action, jobs and business prospects remain bleak as the worsening pandemic takes its toll on China’s export markets, leading to what is known as a second wave of demand slump.
Tesla’s locally made Model 3 electric car could be the only bright spot, after it topped other home-grown rivals in February in terms of sales. The American carmaker began producing the Model 3 at its US$2 billion Gigafactory 3 in Lingang, Shanghai – its only production facility outside the US – towards the end of last year.
A car made in Shanghai cost 299,050 yuan after subsidies in January, whereas a fully imported Model 3 would have cost 370,000 yuan just three months earlier. Tesla sold 3,900 Model 3 cars in China in March, more than double Guangzhou Automobile Group’s Alon S, which came in second place with 1,433 units sold, according to the China Passenger Car Association (CPCA).