China's Passenger Car Sales Plunge 21.5% in April

The aftershocks of the Iranian oil shock are leaving a profound imprint on China's automotive market.

The latest data from the China Passenger Car Association (CPCA) shows that China's passenger car sales in April fell 21.5% year-on-year to 1.4 million units, marking the lowest level for the month since the COVID-19 lockdowns in 2022. The delivery of fuel vehicles plummeted by one-third, and the sales of new energy vehicles (including pure electric and plug-in hybrids) also fell by 6.8% year-on-year, failing to provide an effective counterbalance.

CPCA Secretary-General Cui Dongshu stated at a press conference on Monday: "The decline in fuel vehicle sales is quite severe, exceeding our expectations. The rise in oil prices has had a significant impact on the market."

The "Double Kill" Dilemma: Oil Price Shock Compounded by Policy Rollback

On the surface, the surge in oil prices should have been a catalyst for demand for new energy vehicles, but data reveals a more complex market logic. CPCA data uncovers that the exit of subsidies for vehicle upgrades and the resumption of the collection of purchase tax incentives have put pressure on the demand side for new energy vehicles, offsetting the substitution effect brought about by oil price increases due to policy tightening.

The weakness on the consumer front is not an isolated case. The proportion of automobile-related consumption in China's total social retail sales has dropped to 7.8% in the first quarter of this year, the lowest level in at least five years, while this proportion typically remained between 9.8% and 10.4% between 2022 and 2025.

Li Yanwei, a consultant at the China Automotive Circulation Association, believes: "Why have consumers suddenly stopped buying cars? Mainly two factors - the economic slowdown has led to increased unemployment and wage reductions, suppressing consumer willingness; the skyrocketing oil prices have impacted the stock market and market sentiment." He also warns: "If this proportion continues to be below 8% for the whole year, we need to be vigilant about the possibility of automobile consumption entering a deep structural downturn."

New Energy Penetration Rate Reaches Historical High, Structural Division Intensifies

Despite the overall sales pressure, the sharp contraction of fuel vehicles has structurally pushed the new energy penetration rate to break through 60%, setting a monthly historical record in mainland China. However, behind this figure, it more reflects the collapse of fuel vehicles rather than the true prosperity of new energy consumption.

The leading car manufacturers were also not spared. BYD's total sales in April fell by 16% year-on-year, recording an annual negative growth for the eighth consecutive month; Tesla's Shanghai factory shipped 79,478 vehicles, of which only 25,956 were sold in China, down 10% year-on-year.

However, exports have become a common "lifebuoy" for both car manufacturers. BYD's overseas sales soared by 71% year-on-year; Tesla's Shanghai factory's export volume surged by 80%, delivering production capacity to regions in Southeast Asia and other areas heavily impacted by oil price shocks.

Overall, China's automobile exports in April increased by 112%, with the strong overseas demand for new energy models supporting this impressive figure.

NIO, XPeng face profit pressure, Q2 recovery in doubt

Morgan Stanley analysts pointed out in a research report on May 4th that new force car manufacturers such as NIO and XPeng are expected to return to losses in the first quarter, with the positive momentum of just achieving profitability in the fourth quarter of last year facing the risk of reversal. Analysts believe that whether the second quarter can achieve a warm-up at the operational level will highly depend on the order flow driven by holiday travel and the pace of new product launches of blockbuster models.

The automotive market's predicament reflects economic concerns

For the Chinese economy, the continued slump in the automotive market is by no means an isolated industry phenomenon. Automobiles are the largest consumer goods after real estate, with a cumulative year-on-year contraction of 18.5% in the first four months, which has exceeded the scope of seasonal fluctuations.

When high oil prices, subsidy withdrawal, and weak consumer confidence coincide, whether China's automotive market can find its center of gravity in the second half of the year may become one of the most important windows for observing the direction of China's domestic demand.