(Bloomberg) -- China’s electrified-car market is projected to slow for a second year in 2024 as the nation’s patchy economic recovery from the pandemic weighs on consumer sentiment. 

Shipments of battery electric vehicles and plug-in hybrids to dealers are projected to increase 25% to 11 million units this year, according to the China Passenger Car Association. While still expanding, it’s a slowdown from 36% growth in 2023 and a 96% pace in 2022 - the last year the government handed out national subsidies for electrified cars.

The segment logged 7.74 million vehicles in retail sales for 2023, taking the penetration rate to 35.7%, up eight percentage points compared to the year prior, PCA said.

The forecast for slower growth means it may be harder for automakers to meet their sales targets, after just a third made their goals last year, and suggests a bruising price war that embroiled the industry and crunched profit margins in 2023 has further to run.    

Read More: Five Things to Watch in China’s Car Market This Year: Hyperdrive

“The increase in China’s retail auto sales last year came at a time of intense competition,” PCA Secretary General Cui Dongshu said at a briefing on Tuesday. “These deliveries came at the huge cost to carmakers’ profitability. The pressure remains relatively strong.”

Auto exports surged by 62% last year, as Chinese carmakers search for growth overseas. Their expanding presence has drawn retaliation from the European Union, which in October launched an investigation into Chinese EV subsidies it says distort the market. 

Overall passenger vehicle retail sales in China increased 8.5% from a year earlier to 2.35 million in December, the PCA said, taking the 2023 total to 21.7 million vehicles, up 5.6% from 2022.    

(Updates to add details throughout.)

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