China's auto industry is facing big challenges in the first quarter and still needs policy support, the CAAM said.

China's January new energy vehicle (NEV) sales were 408,000, down 6.3 percent year-on-year and down 49.9 percent from December, according to data released today by the China Association of Automobile Manufacturers (CAAM).

The CAAM's data are wholesale sales by automakers, where NEVs include battery electric vehicles (BEVs), plug-in hybrid vehicles (PHEVs), and fuel cell vehicles.

BEV sales in China in January were 287,000 units, down 18.2 percent year-on-year; PHEV sales were 124,000 units, up 42.5 percent year-on-year; and fuel cell vehicle sales were 200 units, down 15.6 percent year-on-year, according to the CAAM.

Sales of all vehicles in China were 1.65 million in January, down 35 percent year-on-year and down 35.5 percent from December.

This means that the penetration of NEVs in China was 24.7 percent in January, down 7.1 percentage points from 31.8 percent in December.

Production of NEVs in China was 425,000 units in January, down 6.9 percent year-on-year and down 46.6 percent from December. Production of all vehicles was 1.59 million units, down 34.3 percent year-on-year and down 33.1 percent from December.

Both Chinese auto production and sales showed double-digit declines in January, with factors behind the decline including the Chinese New Year holiday and the impact of some early consumer demand overdraft, the CAAM said.

The decline in production and sales of NEVs was due to the withdrawal of Chinese subsidies for NEV purchases, as well as significant market price volatility, according to the CAAM.

Looking ahead to the first quarter, China's auto industry faces a big challenge to achieve stable growth, with a lack of domestic effective demand leading to a lagging recovery in auto consumption, which still needs policy support, the CAAM said.

Notably, China's auto exports have maintained their resilience.

In January, exports of vehicles from China were 301,000 units, up 30.1 percent year-on-year despite 7.1 percent lower than in December.

Among them, 83,000 NEVs were exported, up 48.2 percent year-on-year and up 1.1 percent from December.