Whatâs Going On Here?The Chinese government is reportedly set to roll out measures to boost spending on the countryâs car industry by $30 billion this year. What Does This Mean?Car sales in China â the worldâs biggest auto market â have tailed off in the last few months, given that itâs both difficult and irrelevant to buy a car when youâre trapped in lockdown. In fact, there wasnât a single person among Shanghaiâs 25 million-strong population who bought one in April. And with the government now withdrawing subsidies designed to encourage drivers to buy EVs, demand could slide even more. But while the authorities taketh with one hand, they giveth with the other: state TV reported this week that the government is thinking about extending tax exemptions for EV buyers. That bodes well for the likes of Li Auto, Xpeng, Nio, and BYD, all of which saw their shares rise after the news. Why Should I Care?Zooming in: Itâs BMWâs time to shine.
BMW will be pleased to hear it: the German carmaker â whose Chinese sales fell in the first quarter from the same time in 2021 â announced on Thursday that production is now underway at its new $2.2 billion plant, which itâs hoping will increase its annual EV output in China by nearly 20% (tweet this). The plant is BMWâs third assembly facility in the country, and itâs been designed to produce only enough EVs to meet demand, rather than the mass production lines of old.
The bigger picture: Self-inflicted wounds.
Chinaâs lockdowns mightâve done a number on its economy, but there could be an even bigger risk to the country in the form of its languishing property market. The sector represents around 20% of the countryâs output, and itâs been left in tatters by the governmentâs tough stance on the sector. In fact, Goldman Sachs is expecting the sector to drag economic growth down by 1.4 percentage points this year. | 