(Yicai) April 10 -- Car sales in China tumbled more than 17 percent in the first quarter from a year earlier after the country scaled back the purchase tax exemption on new energy vehicles, which had previously spurred consumer demand, while auto exports surged to a record high.

Nearly 4.23 million cars were sold at retail in China in the three months ended March 31, with NEV sales plunging 21 percent to almost 1.91 million, according to data released by the China Passenger Car Association yesterday.

The quarter was better than expected overall, CPCA Secretary-General Cui Dongshu noted. The decline was mainly the result of changes to the NEV purchase tax exemption and the overlapping effects of the Chinese New Year holiday.

The holiday, which typically causes a sharp, temporary drop in car sales, ran for nine straight days from Feb. 15 to 23, one day more than in previous years. And since Jan. 1, NEV buyers have had to pay a 5 percent vehicle purchase tax, rather than being fully exempt, with the exemption cap set at CNY15,000 (USD2,195) per car.

A “domestic retail decline and export surge” characterised the quarter, Cui said.

March’s sales sank 15 percent to nearly 1.65 million autos from a year earlier, CPCA data also showed. NEV sales fell over 14 percent to about 848,000, with NEV adoption climbing to 51.5 percent from 51.2 percent a year ago.

Exports surged 74 percent to 695,000 cars, with outbound NEV shipments soaring 140 percent to around 349,000, accounting for over 50 percent of the total, up from 36 percent in the same period of last year, according to CPCA data.

“Both NEV and fuel vehicle exports hit all-time monthly highs in March,” Cui pointed out.

BYD was March’s top exporter, with 116,882 NEVs shipped, followed by Geely Automobile Holdings at 52,186, Chery Automobile at 40,837, and Tesla China at 29,563.

The global oil price shock has driven strong demand for Chinese plug-in hybrid models overseas, according to Cui. They accounted for 44 percent of NEV exports last month, up from 35 percent a year earlier.

Profits are being concentrated upstream in the industry, with carmakers under severe financial pressure, Cui said. In January and February, their profit margin was just 2.9 percent, well below the 5.8 percent average for downstream suppliers. Their profits fell 30 percent from a year ago.

The CPCA noted that the US artificial intelligence boom has inflated global prices for chips, memory, and non-ferrous metals, while the cost of oil has spiked on the back of the Middle East crisis. These pressures are driving up component prices and operating costs, curbing consumer demand, it said.

Although there could be a further sales drop this quarter, the association believes the market will stabilize and return to expansion in the second half, with the upcoming Beijing Auto Show renewing buyer interest.

Editor: Futura Costaglione