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Surging NEV Market Encounters the China-US Trade War

2018-11-05 11:23 Monday


China's auto industry has slowed after a decade of rapid growth. As trade tension between the U.S. and China has escalated, Chinese consumers have been more cautious about spending. Auto sales in China dropped in August to 2.1 million, a decrease of 3.8% from early 2018, after a 4% fall from July, the second consecutive monthly decline. Winter is coming for China's car market

The Trump administration has already imposed tariffs of up to 25% on Chinese-made vehicles, meaning that a price-hike is around the corner, which will in turn have a chain reaction across the auto industry.

Although there are other factors that have raised prices the high tariff is the primary reason for slowing sales.

According to the head of Ford's North American operations, the automaker abruptly cancelled plans to sell Chinese-made vehicles in the United States due to  the prospect of higher U.S. tariffs.

The market share of U.S. brands in China also fell to 10.7% in the first eight months of 2018, from 12.2% the previous year, according to the China Association of Automobile Manufacturers. The drop was caused by companies that have been unresponsive to changes in the market, Xu Haidong, the association's Assistant Secretary General said.

The high tariffs have also had negative implications in the stock market. Auto stocks are among the worst performers in Hong Kong during 2018, with Great Wall's stock price fallingby 53%  and Guangzhou Automobile Group Co. declining by 45%.

But every crisis presents opportunities for upstart players. Whereas the traditional auto industry has seen declining sales, sales of new-energy vehicles in China-a category comprising electric battery cars and plug-in electric hybrid vehicles rose 49.5% in August from 2017, to surpass 100,000 vehicles for the first time.

new-energy vehicles

The surge in August took new-energy vehicle sales over the first eight months of 2018 to 601,000 vehicles, up 88% from the same period in 2017, making China the world's largest NEV market for the third consecutive year.

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