The number of new energy cars sold in China dropped 61% year-on-year to 5,423 in January, due to a 20% cut to purchase subsidies and negative impact from a week-long national holiday.
February was a tough months as well. Many Chinese new energy car companies reported disappointing sales last month. Anhui Jianghuai Automobile Group Corp., a new energy car maker in Anhui province, sold 125 electric cars last month, down 89.42% year-on-year. The company failed to sell any pure-electric passenger vehicles in January.
Beijing-based BAIC Motor Corp. experienced a drop of 36% year-on-year in sales in February. Sales in many other new energy car makers also declined significantly.
New Energy cars are defined as vehicles powered by alternative sources of energy. They include hybrid, pure electric vehicles, fuel cell electric vehicles and other alternative energy-powered cars.
In December, China's Ministry of Finance, National Development and Reform Commission, Ministry of Industry and Information Technology and Ministry of Science and Technology issued a new policy to reduce purchase subsidies to buyers of new energy cars, except fuel cell electric vehicles, by 20% on the national and local government level.
The action follows the surface of fact that some new energy car companies have been making fraudulent applications in order to receive subsidies. The government cracked down on those illegal activities and fined some companies for the misconduct.
The week-long Chinese New Year celebration, which fell in January this year, also impacted sales negatively. The number of automobile sold in January 2016 also experienced a significant drop, down 63% month-on-month.
In addition, China is in the middle of adjusting its list of new energy vehicles eligible for receiving subsidies. Once the five lists are reviewed and finalized, vehicle purchases should pick up somewhat, according to an official at the China Association of Automobile Manufacturers.
Ye Shengji, vice secretary of the Chinese auto maker association, said the country's new energy car market is expecting to increase 50% this year in terms of sales, reaching a total of 700,000 to 800,000 cars sold.