China NEV sales forecast for October down 10% MoM as economic picture remains obscure

The China Passenger Car Association (CPCA), on October 24, released its sales expectations for the month of October. The release indicates that 550,000 new energy vehicles (NEV) are expected to be sold, a 73.5% year-on-year (YoY) increase. 

However, this number represents a 10% month-on-month (MoM) decrease, pushing down the NEV penetration in China to roughly 28.8% in October. 

Covid seems yet again to be the reason for a drop in auto sales and NEV sales in general, as signs of lower holiday travel spending are worrying the government and retailers as the economy continues to show signs of weakness. 

Future spending 

The CPCA is seeing new vehicle availability increasing as the end of the year draws closer, possibly spurred by NEV subsidies the government is offering, along with the expiration of license plate incentives in some regions. According to CPCA, this could bring forward some future spending and possibly support the automobile sector. 

It is important to note that during September, the number of NEV sales reached a record number, increasing 90% YoY. 

Price wars 

Meanwhile, Tesla (NASDAQ: TSLA) decided to cut its Model 3 and Model Y prices in China by as much as 9%, following a slight shortfall in delivery numbers in Q3. The model prices were discounted between 15,000 to 30,000 yuan (~ $2,065 – $4,130). 

The price cut in Tesla models also follows a recent announcement that Tesla delivered a record number of China-made EVs for the month of September, as well as the desire of CEO Elon Musk to ramp up production coming into Q4. 

A recession of sorts

While China and Europe are experiencing turbulent market times, an argument that both markets are hit with a type of recession could be made. China is facing issues in the property market and Covid lockdowns, while Europe is facing an energy crisis.

If adverse market conditions persist, sales of NEVs in China may continue to fall, and despite price cuts, Tesla may fail to hit their delivery numbers for 2022. 

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