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The national retail sales of NEVs, the sector including battery electric vehicle (BEV) and the plug-in hybrid electric vehicle (PHEV), surged 85.6% year-over-year (YoY) to 527,000 units in April, the China Passenger Car Association (CPCA) released on Tuesday. The retail sales declining 3.6% from the previous month, while the growth of NEVs has accelerated notably compared with a 21.6% YoY increase in March. Sales in the first four months of the year increased to 1.843 million vehicles with a YoY increase of 36%, much stronger than the 22.4% growth in the first quarter.

The overall retail sales of passenger vehicles climbed 2.5% to 1.63 million units from March, one of two positive monthly growth since 2010. The figures represented a markedly 55.5% increase from a year earlier, when China experienced an extensive Covid-19 lockdown due to outbreaks. CPCA pointed out sales in April continued the trand of steady recovery at the end of March, mainly driven by fading fear of dealerships as the cooling price war, the consumption from consumers in wait-and-see mode back to rational, which unlocked part of previously subdued demands. Additionally, the demand for travel prior to the three-day Labor Day holiday played a role in increasing interests of vehicle purchase.

CPCA data suggests a penetration rate of 32.3% for NEV by retail sales in April, up 6.6 percent points from a year ago. The penetration in March improved 6 points YoY to 34.2%. Out of NEV automakers, retail sales from the home-grown brands accounted for 70.5% in April, down 5 points YoY, and Tesla’s shares increased 7 points to 7.6%. Shares of electric vehicle (EV) startups dropped 3.9 points to 13.1%, but CPCA found firms such NIO and Li Auto showed relative strong performance in sales either yearly or monthly.

On the track of stable development, the auto industry was fueled by NEVs, though under big pressure of profitability, CPCA commented. The industry body believes the pressure mainly resulted from the stricter national emission standards for vehicles effective on July 1, which forced auto companies to clear inventories of vehicles unqualified for the new standards with lower prices. Data from showed the profit declined 24% YoY to RMB81.9 billion with a gross margin of 3.8%, compared with the average margin of 4.9% for the whole industrial businesses.

CPCA treated recent price increases of Tesla as positive news for operation condition of the overall auto market. It said the increases suggested automakers’ focus on operating quality, which is useful for consumer’s further transition from their wait-and-see attitude and encourage them back to normal purchase pace.

In the beginning of this month, Tesla China has raised prices twice in just four days. It has increased prices for Model Y and Model 3, its two top-selling models, by RMB2,000 in China on May 2, and hiked by RMB RMB19,000 for Model S and Model Y, a batch of new models that started delivery in March in the country on May 5. Such moves are really unexpected as Tesla CEO Elon Musk signaled more cuts to come at the earnings call last month. "We've taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and a higher margin," Musk said.

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