China automotive market faces crisis as car sales drop 28%

The Chinese automotive market is experiencing a significant crisis, with passenger car sales falling by 28 percent year-on-year in September. This decline represents the largest drop this year, defying expectations of a seasonal rebound typically seen during the “golden month” of September.

Analysts attribute the slump to the reduction of government subsidies for vehicle replacements and the phasing out of tax incentives. The industry is currently facing a dual challenge of declining domestic demand and massive overcapacity. Chinese factories possess the capacity to produce millions more vehicles than the current domestic market can absorb, leading manufacturers to look toward exports as a means of survival.

While internal combustion engine sales plummeted by 43 percent, electric vehicles (EVs) and plug-in hybrids saw a smaller decline of 16.7 percent, resulting in EVs capturing a record 67 percent of monthly new car sales. As Chinese firms seek new markets to offset domestic losses, they are increasingly targeting the European market, including the premium segment, despite efforts by the European Union to implement limits on imports.