Fitch: China's Electric Vehicle Demand to Rise, EU's High Tariffs May Harm Exports

Fitch Ratings stated that China's strong domestic demand for new energy vehicles (NEVs) is expected to continue until the fourth quarter of 2024, thanks to the government's enhanced scrappage and renewal program, despite uncertainties regarding consumer sentiment recovery.

"However, increasing EU tariffs are likely to affect Chinese exports, and it is probable that automobile manufacturers will slow down wholesale deliveries towards the end of 2024," Fitch noted, highlighting that China's retail sales of passenger vehicles rose by 4.3% year-on-year in September, reversing five months of decline.

Fitch added that the growth continued into October, supported by the vibrancy in consumer sentiment due to the economic stimulus package announced at the end of September. According to estimates from the China Passenger Car Association, robust orders during the Golden Week holidays contributed to an 8.2% year-on-year increase in retail volume in October. "NEVs have become mainstream in China, capturing a 52.8% market share in Q3 2024," it stated.

Fitch also emphasized that they expect the growth between NEVs and internal combustion engine vehicles (ICEVs) to further diverge due to global automakers streamlining their ICEV operations in joint ventures in China amid weakening profitability.