China's car sales fell causing concerns.

 January in China's automotive sector saw a mixed picture, with overall sales rising by 47.9% compared to January 2023 but manufacturers remaining cautious as sales fell short of expectations and declined compared to the previous month, marking the first decrease since August. The nation's automakers managed to sell 2.44 million vehicles (including exports) last month, which was down 22.7% compared to December 2023. This has analysts on the edge, and suggests that the next 11 months may prove to be difficult for the market.

New energy vehicles (NEVs), including EVs, hybrids, hydrogen, and other technologies, accounted for 29.9% of the market's total sales, indicating a growth of 78.8% year-on-year. However, sales of electric vehicles dropped by 37% compared to December, falling well below expectations. Cui Dongshu, the secretary-general of the China Passenger Car Association, noted that EVs have become a drag to market growth and anticipates that the pricing competition initiated by Tesla will continue throughout 2024.

The wider Chinese economy is facing serious difficulties, with an extended housing market downturn and the stock market reaching five-year lows. This is slowing demand for new cars, leading companies like Tesla to offer discounts on the Model 3 and Y last month. Many domestic automakers are looking outside of China for relief. Exports have been a lifeline for the country's automotive sector, but they aren't a sure thing either. Friction in markets like Europe, where trade restrictions are being considered, has led China's commerce ministry to encourage the nation's automakers to "actively" respond to trade concerns and to cooperate with foreign companies.

In January, passenger vehicle sales in China plunged 37.9% on year and slumped 40.4% on month, the worst performances for January since the 2000s, according to the China Passenger Car Association (CPCA). The sales were also hit due to shortened business days as the week-long Chinese New Year fell in January last year. China exported 443,000 vehicles in January 2024, accounting for 18.2% of the total sales, while nearly one out of seven NEVs sold during the month was also exported.

China's commerce ministry said on Wednesday it would encourage the NEV industry to "actively" respond to foreign trade restrictions and cooperate with overseas firms amid a European probe into Chinese subsidies for the sector.