China’s sales of electric vehicles (EVs) plunged by 37% in January from December, according to data from the China Passenger Car Association (CPCA) on Thursday.
Passenger vehicle sales also fell by 14.1% in January from the previous month, which was the first such slide since August.
Sales totalled 2.05 million units, up 57% from a year earlier.
The slump in electric vehicle sales was far below expectations, and will be a major source of pressure on auto market growth, the association’s secretary general Cui Dongshu said.
A price war among automakers will remain fierce in 2024, Cui predicted. More than 40 brands joined the price war that was triggered by Tesla in China throughout 2023.
Demand faltered in the world’s largest auto market despite a renewed discounting push led by Tesla at the start of 2024.
Honda sales up in US, down in China
Meanwhile, in other auto news, Japan’s Honda Motor reported a sharp rise in operating profit for the December quarter and lifted its annual outlook. The group was helped by robust sales in the United States, plus a more profitable product mix and a weaker yen.
The automaker raised its full-year operating profit forecast by 4.2% to 1.25 trillion yen ($8.4 billion), versus an earlier estimate of 1.2 trillion yen and an average analyst forecast of 1.271 trillion yen, according to LSEG data.
For the October-December third quarter, operating profit rose 35% to 379.8 billion yen, in line with the average estimate of 371.6 billion yen in a poll of nine analysts by LSEG.
Honda also announced a $336 million share buyback, saying it would purchase up to 0.7% of its own shares.
Honda said last month its global sales grew 5.6% to nearly 4.0 million vehicles in 2023, lifted by a 33% jump in sales in the US and marking its first sales growth in its biggest market in eight years as the shortage of high-tech chips abated.
In contrast, it saw a 10% sales slump in China to 1.2 million vehicles amid intense competition from newer Chinese auto brands.
Honda will have to optimise its manufacturing capacity in China and avoid ending up with excess production capacity after it brings online two new plants for building battery-powered vehicles, CFO Eiji Fujimura told a press briefing.
Honda, a laggard in the shift to battery-powered electric vehicles, unveiled plans last month to launch a new EV series from 2026, showing off two concept EVs at the CES trade show in Las Vegas.
Toyota at record high up as EV sales cool
And Toyota Motor shares hit a record high on Wednesday after its earnings upgrade the prior day, with rivals Honda and Nissan also posting gains on expectations their solid hybrid lineups may benefit from cooling interest in electric vehicles.
Weakening momentum for battery-powered vehicles has led many overseas automakers to scale back roll-out plans for EVs or cut production targets as lower government subsidies and high interest rates make EV purchases harder for customers.
Toyota’s strong financial performance in the third quarter was helped by robust demand for gasoline-electric hybrid vehicles, the world’s top-selling automaker said on Tuesday.
Its shares were up 4% on Wednesday afternoon after jumping as much as 7.3% to a record high in the morning session, outperforming a 0.2% advance in the broad Topix index.
Nissan Motor’s shares rose 2.9% in afternoon trade after gaining as much as 4.3% earlier. Those of Honda Motor advanced 1.3% after rising as much as 2.6% earlier.
“We think the market is now rethinking the potential of hybrid products, which are a strength of Toyota,” analysts at Goldman Sachs wrote in a note released after Toyota raised its operating profit guidance by nearly 9% for the 12 months ending March 31.
The company’s progress on raising prices that helped boost its earnings per vehicle was likely the biggest driver for the higher operating profit forecast, the analysts added.
Toyota’s shares have risen 80% since the start of 2023, compared to a 69% rise in Honda’s shares and Nissan’s 47% gain over the same period. Their gains easily eclipsed a 34% rise in the Topix over that period.
After posting its results, Toyota announced on Tuesday it would invest an extra $1.3 billion in its Kentucky plant in the United States for electrification efforts, including assembly of a three-row battery electric sports utility vehicle for the US market.
- Reuters with additional editing by Jim Pollard