China's Electric Vehicle Exports Expected To Slow Down In 2025

BEIJING: An official from an auto association has stated that China's auto exports are expected to decline significantly this year after maintaining the top export position for a second consecutive year in 2024, with no increase anticipated for electric vehicle exports. Car exports increased by 25 per cent to 4.8 million units, as reported by the China Passenger Car Association (CPCA), suggesting that China likely maintained its position as the world's largest auto exporter ahead of Japan for a second straight year in 2024, despite the European Union's new tariffs on China-made electric vehicles enacted in late October. 

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According to the Japan Automobile Manufacturers Association, Japan's vehicle exports decreased by 4.3 per cent to 3.82 million units in the initial 11 months of 2024. However, export growth is anticipated to slow to 10 per cent this year, with a predicted decline in shipments to Russia exacerbating tariff pressures in Europe, according to Cui Dongshu, secretary general of CPCA, who stated that EV exports are projected to experience 'zero growth'. Last year, exports of electric vehicles and plug-in hybrids, referred to collectively as new energy vehicles (NEVs), increased by 24.3 per cent to reach 1.29 million. 

China's EV Exports Slow Amid EU Tariffs, Domestic Market Thrives with Record NEV Sales in 2024

A year-long investigation into subsidies for Chinese-built EVs affected exports to the bloc, with 10 per cent growth in the early months significantly lagging behind a 36 per cent rise in 2023, as reported by the association. Per CPCA, Russia, Mexico, and the United Arab Emirates ranked as the leading markets for cars manufactured in China during the initial 11 months of 2024, whereas exports to Thailand, Australia, and the UK decreased. Although EU tariffs may restrict the sales of Chinese EVs temporarily, setting up production plants in Europe, like BYD's facility in Hungary, will enable China's automotive manufacturers to increase their market share in the long run, according to Charles Lester, a research analyst at Rho Motion. 

China's Auto Exports Decline

In China's domestic market, the largest globally, car sales continued to grow in 2024 as electric vehicle and plug-in hybrid sales reached a record peak amid a fierce price war and subsidized trade-ins for eco-friendly cars boosting demand. The remarkable expansion in China amidst a predominantly stagnant global EV scene presents a positive outlook for domestic frontrunners like BYD (002594.SZ), opens a new tab, Geely (GEELY.UL) and Xiaomi (1810.HK), opens a new tab and hastens an industry consolidation in a fierce market. It also helped Tesla (TSLA.O) open a new tab, whose sales in China reached an all-time high in 2024, contrasting with a general drop in the U.S. electric vehicle giant's worldwide sales. Other international car manufacturers like General Motors (GM.N), Toyota (7203.T), and Volkswagen (VOWG_p.DE) have continued to cede market share to Chinese competitors, as many face challenges in maintaining efficient capacity utilization at their facilities in China. Sales of passenger vehicles increased by 5.3 per cent to reach 23.1 million units in 2024, marking the fourth consecutive year of growth, consistent with the 2023 trend, according to CPCA data. NEV sales increased by 40.7 per cent, accounting for 47.2 per cent of total vehicle sales last year, approaching a 50 per cent milestone, supported by a program similar to the U.S. "cash-for-clunkers" initiative in 2009. 

China Extends Auto Trade-In Subsidies Amid Slowing NEV Growth and Declining Profit Margins

Over 6.6 million vehicles sold last year took advantage of government incentives of up to Rs 240403.24 ($2,800) for NEV acquisitions and as much as Rs 240403.24 ($2,000) for more efficient combustion engine cars. Official data indicates that over 60 per cent of the subsidized acquisitions were for NEVs. On Wednesday, Beijing declared an extension of the auto trade-in subsidies through 2025 as a component of a broadened consumer trade-in program aimed at boosting economic growth. "According to Deutsche Bank analyst Bin Wang, the vehicle trade-in subsidy program is anticipated to increase total demand for 2025 by 3.0 million units." 

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According to CPCA, car sales are projected to increase by 2 per cent this year, while NEV sales are anticipated to grow by 20 per cent, accounting for 57 per cent of China's overall car sales. This indicates that the increase in sales of EVs and plug-in hybrid vehicles in 2025 might be the lowest since 2021, despite Cui's estimation that government subsidies will remain at a peak level this year. Even with increasing sales, China's automotive sector has experienced declining profitability over the years. Profit margins from sales stood at 4.4 per cent during the first 11 months of 2024. This is in comparison to 5 per cent in 2023 and 6.2 per cent in 2020, as reported by the association.