Sales of new energy vehicles (NEVs) in China dropped 18.6% month-on-month in January after the country cut subsidies for NEVs by 30%, according to data released by China Association of Automobile Manufacturers (CAAM).

“In December, the total number of sales jumped because buyers rushed to buy NEVs ahead of a subsidy cut in new year,” Cui Dongshu, Secretary-General of another industry body China Passenger Car Association (CPCA) said.

In December, 518,000 NEVs were sold in China, up 159.5% year on year. The total number of sales for NEVs, which includes electric, plug-in hybrid and hydrogen fuel-cell vehicles, stood at 431,000 in January, representing a year-over-year increase of 135.8%.

China has been aggressively pursuing electric vehicles in an effort to curb vehicle emissions and promote high-tech industries, and sales of electric vehicles in China have grown tenfold since 2014, it has been just four years since sales of electric vehicles in China overtook those in the U.S last year. But the strong growth has been dependent on China’s generous subsidy policy, which allows EVs start-ups to lower prices.

However, the subsidy-led growth model cannot sustain in the long term, Chinese government cut subsidies to encourage local electric makers to rely on innovation rather than government support as the industry become more mature.

The current share of new energy vehicles account for 13.88% of total car sale in China, 2.88 million NEVs were sold in China in 2021, of which electric vehicle contributed 82% of the total sales of NEVs, according to data of China Electronic Chamber of Commerce.

China set ambitious goals in promoting NEVs as part of efforts to curb air pollution, China’s State Council said the share of New Energy Vehicles would account for 20% of total new car sales in China by 2025 and account for the majority of sales by 2035.

Data from China Passenger Car Association showed that U.S. electric vehicle maker Tesla sold 59,845 China-made vehicles in January, up a whopping 286.5% year-over-year.

China big three-Nio, Li Auto and Xpeng also completed robust sales number.

Xpeng’s sales up 115% year-over-year to 12,922 vehicles in January. Li Auto, which sells extended-range electric vehicles, sold over 10,000 vehicles for three consecutive months, it sold 12,268 vehicles last month that represented a year-over-year increase of 128.1%.

Tesla is the only foreign automaker among the top ten best-selling NEV brands in China as it is facing fierce competiton in the country. Local rivals such as Nio, Xpeng and Li Auto gained a better understanding of what Chinese consumers want for electric vehicles, so that manufacture products that more tailor made to local tastes.

Nio was the worst performer among three Chinese electric vehicle makers, it only booked an annual increase of 33.6%, reaching 9652 vehicles in January.