China’s Car Sales Slump as Gasoline Demand Craters

Car sales in China fell by 21.5% in April, driven by lower demand for gasoline-powered vehicles amid higher fuel prices. EV demand failed to offset the drop in internal combustion engine vehicle sales, as well.

According to data cited by Bloomberg, total car sales in China last month hit 1.4 million. This was the lowest since 2022, when China was still in the grip of Covid lockdowns. Internal combustion engine car sales suffered a decline of over 30%, while EV and hybrid car sales fell by a more modest 6.8%. EV sales suffered as a result of a rollback of subsidies and the reintroduction of a tax on what China calls new energy vehicles.

As a result of the slump in gasoline car sales, new energy vehicles came to account for 60% of new car sales last month. This is the highest monthly portion of EVs and hybrids of total new car sales.

In addition to the fuel prices, subsidy removal, and the return of taxes on EVs, China’s car sales declined as a result of weaker purchasing power – another consequence of the war in the Middle East. The energy crisis has slowed down China’s economic growth, prompting job cuts and lower wages, which have in turn affected consumers’ spending appetite, Bloomberg noted in its report.

China has the world’s largest crude oil stockpiles, estimated at between 1 billion barrels and up to 1.3 billion barrels. This provides the country with quite solid insulation against supply shocks – even though it has not prevented retail fuel prices from moving higher.

Thanks to this reserve cushion and its diversification policies, despite being the top crude importer in the world, China is less exposed to the Hormuz crisis than many other buyers in Asia, including India and the developed economies of Japan and South Korea. India relies on the Middle East for about 60% of its crude supply, while Japan’s dependence is a massive 90%.

By Irina Slav for Oilprice.com

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