China's car sales fall for second consecutive month as domestic demand declines

China's passenger car sales fell for a second straight month in May from a year earlier, industry data showed on Tuesday, as a slowdown in demand is becoming entrenched in the world's largest auto market amid a sputtering economic recovery.

Car exports, increasingly an important source of growth for local automakers due to slowing domestic demand, retreated from April's record high, amid anti-subsidy probe by the European Union on China-made electric vehicles.

Passenger vehicle exports fell nine per cent from the previous month to 378,000 units in May, while overall sales were down 2.2 per cent, following a 5.8 per cent decline in April, according to data from the China Passenger Car Association (CPCA).

Sales totalled 1.72 million vehicles last month and were up 5.3 per cent at 8.15 million units in the first five months from a year ago. New energy vehicles including pure electric and plug-in hybrids made up 46.7 per cent of total car sales, a fresh monthly high.

EVs drive growth

While China's passenger vehicle sales have declined, sales of new energy vehicles, such as electric or hybrid, have risen to account for 46.7 per cent of total car sales (file photo used for representational purpose.) (AP)

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While China's passenger vehicle sales have declined, sales of new energy vehicles, such as electric or hybrid, have risen to account for 46.7 per cent of total car sales (file photo used for representational purpose.) (AP)

Electric vehicle sales accelerated 27.4 per cent in May from 12.1 per cent in April, while plug-in hybrid sales rose 61.1 per cent versus a 64.2 per cent jump in the prior month.

Hyper-competition and the EU tariff threat, which China labels as protectionism, have done little so far to impede local EV makers' moves to ramp up production and explore overseas markets. Nio, the eighth biggest EV maker in China by sales, has won regulatory approval to build a third factory in China that would boost its total approved production capacity to one million cars, Reuters reported. The EV upstart opened its first showroom in Amsterdam in May.

Sales of EV and plug-in hybrid sales have been helped by the government's subsidies for new energy vehicle trade-in schemes worth 11.2 billion yuan ($1.55 billion) this year which contrasts with a continued decline in demand for gasoline cars.

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