Benzinga | Oct 27, 2021 03:04AM EDT

EV Share Of Total China Passenger Vehicle Sales Rises To 18.6% In Q3 As Nio, Volkswagen, Others Take On Tesla

Electric vehicle sales' share of the total passenger vehicle sales in China jumped significantly to 18.6% in the third quarter at a time when a lingering chip shortage hit production and sales of traditional internal combustion vehicles.

What Happened: Electric vehicle share of the total passenger vehicle sales in China rose to 18.6% in the three months ended September, from 13.2% in the second quarter.

As per the rating agency, deliveries of electric vehicles in China nearly tripled in the third quarter.

See Also: Is Tesla On Track To Deliver Apple-Like Gross Margins Amid China Demand Rebound? Bulls Munster And Ives React To Q3 Earnings

Wholesale deliveries -- vehicles shipped to dealers -- of traditional combustion engine vehicles plunged by over 25% in the third quarter on a year-on-year basis. The sharp decline was led by a lingering global microchip supply chain, which was further strained by the COVID-19 pandemic in Malaysia.

The supply bottlenecks weighed on retail sales with dealers' inventories falling to the lowest since early 2018, the rating agency said.

Why It Matters: China, the world's largest auto market, is speeding towards electrification. The Chinese government is targeting 20% of all new car sales by 2025 to be new energy vehicles, with electric vehicles making a major contribution.

China is also a hot destination for global automakers including Germany's Volkswagen Ag (OTC:VWAGY), which is also the largest carmaker in the country.

See Also: Volkswagen To Launch ID.3 EV In China On Friday, Looking To Take On Tesla, Nio With More-Affordable Vehicle

Electric vehicle leader and market disruptor Tesla Inc (NASDAQ:TSLA) counts China as a key market for growth, despite recent regulatory concerns.

The Elon Musk-led Tesla reported third-quarter sales of $3.11 billion in China in the third quarter, nearly half of where they stood in the United States.

Foreign automakers are also seeing tough competition from homegrown electric-vehicle startups such as Nio Inc (NYSE:NIO),and Xpeng Inc (NYSE:XPEV).

See Also: Ford Rolls Off First Mustang Mach-E EVs Off Assembly Lines In China, Setting Stage To Compete With Tesla, Nio

Price Action: Nio shares closed 1.96% lower at $40.47 a share on Tuesday.