China’s June passenger car sales are expected to drop 5.9% in June from the same month last year, when deliveries jumped as Shanghai emerged from a punishing Covid lockdown.

The Passenger Car Association said Sunday that retail sales will total about 1.83 million units, compared with 1.94 million in June 2022. While that’s higher than full-year sales in countries such as the UK and Canada, demand in the world’s biggest automotive market remains far below its pre-pandemic peak despite reopening and the government’s stimulation efforts.

There are signs of growing stability. Sales have risen month-over-month throughout 2023 and are nearing the peak performance seen during the Covid years. Overall, car deliveries grew 4.2% in the first five months of this year compared with 2022.

Price War Squeezes Chinese Carmakers With No Relief in Sight

It’s a modest increase considering that a price war has slashed the cost of some models by up to 40% and the government is offering incentives. Beijing has launched a six-month drive to boost the industry, promoted electric vehicles in rural areas and extended a tax break for clean car purchases until 2027 in recent weeks.

Clean car sales are expected to grow 26% to 670,000 units in June 2023 from a year earlier, a more moderate rise compared with the explosive 130% increase seen in 2022.

(Update to add chart)