Chinese auto sales decreased in June due to a sluggish domestic economy, according to the China Association of Automobile Manufacturers. Sales in China fell 7.4% from the previous year to 1.8 million cars, but exports saw a 29% increase to 400,000 units in the same period. Across the first six months of the year, exports surged by 31.5%, while domestic sales only saw a modest 1.6% increase. The rise in exports has raised concerns in Europe and the United States about the potential impact of competitively priced Chinese cars on established Western automakers. Notably, the growth in exports has been primarily driven by gasoline-powered vehicles, which saw a 36% increase and represented 78% of the total vehicle exports. Meanwhile, Chinese electric vehicle (EV) exports declined by 2.3%, while hybrid exports spiked by 180% from a smaller initial base. These export sales have helped offset the decline in gasoline vehicle sales within China as the market has become stagnant, with consumers shifting towards electric vehicles and hybrids. Notably, Russian market is the largest and fastest-growing export destination for Chinese auto manufacturers, with significant markets also in Brazil, Mexico, the United Arab Emirates, Saudi Arabia, Belgium, and the UK. In response to alleged unfair advantages due to government subsidies, the European Union imposed provisional duties on Chinese electric vehicles recently. Chinese automakers are responding by expanding their production facilities overseas. For instance, BYD, China’s largest EV producer, inaugurated a manufacturing plant in Thailand last week and has plans to establish factories in Brazil, Hungary, and Turkey. The decline in auto sales in China for the second consecutive month coincides with a broader trend reported by the China Passenger Car Association, which has recorded three consecutive months of decreasing sales. This downturn has been linked to a real estate crisis affecting the Chinese economy, leading to slower growth and reduced consumer confidence.
