Sales of passenger vehicles in China fell by 17% year on year to 1.35 million units in May 2022, according to retail data released by the China Passenger Car Association (CPCA).

Sales volume was 30% higher month on month, however, as day to day business to normalised in several cities in the country after Covid lockdowns were eased.

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Shanghai remained under strict lockdown until the end of May, however, which was the main drag on the market last month. Many carmakers also continued to struggle with the global shortage of semiconductors.

Leading electric vehicle (EV) manufacturers reported sharp sales rebounds in May, mainly from weak year earlier levels, including Li Auto which reported a 166% year on year jump to 11,496 units; XPeng 10,125 units (+78%); and Nio 7,024 units (+5%).

The industry expected a strong market rebound in the second half of the year, as manufacturers clear strong order backlogs as the semiconductors shortage begins to ease and following stimulus measures introduced by the central government.

At the beginning of June, the government cut the sales tax rate from 10% to 5% on fuel efficient passenger vehicles costing up to CNY300,000 (US$45,000) and with engine no larger than two litres until the end of 2022, providing a substantial lift to the market in the second half of the year.