China's adoption of electric vehicles has been driven by a government subsidy program that seems to be coming to an end at the moment.
The China Association of Automobile Manufacturers (CAAM) said earlier this month that weak demand for vehicles is one of the reasons for the pullback in the subsidy program.
CAAM reported that sales of electric vehicles plunged 45% in October.
"Because of the insufficient demand of the domestic market, the pressure for automakers to upgrade their technology to the national standard, and the major subsidy cuts for new energy vehicles, the recovery of production and sales is still limited," said Chen Shihua, assistant secretary-general of the group.
CAAM warned that the electric car market would continue to deteriorate through 2020. It won't be until the global economy troughs that the industry could stabilize.
The slowdown has also rippled through manufacturers of car batteries.
Data from SNE Research, via Bloomberg, shows battery demand in September plunged as electric car demand decreased.
Batteries sold by some of the largest manufacturers in the country, such as Contemporary Amperex Technology Co. Ltd., dropped 10% in September. Other manufacturers were less fortunate, as battery sales for BYD crashed 71%.
"Weak demand in China is expected to continue, and there's still uncertainty in the U.S. market," SNE Research said. "We could continue to see smaller growth for the full year."
As a result of subsidy reduction as the market cools, going down the supply chain, battery makers have been some of the hardest-hit companies, which the slump has pressured spot lithium prices. As shown in the chart below, spot prices have plunged 37% since 2H18.
Perhaps the downturn in China's electric vehicle industry is an ominous sign for global stocks?