“For both 2014 and 2015, xEV sales in China grew by more 300% annually,” said Eric Chang, TrendForce automotive electronics analyst. “China has become the largest xEV market in the world, not only surpassing Japan and the U.S but also accounting for over half of the global sales in 2015. The xEV industry will continue to depend on China as the engine of sales growth.”

While the outlook of China’s market remains positive, Chang noted that growth are being dampened by the government’s policy of gradually reducing purchasing subsidies on a yearly basis from 2016 onward. Furthermore, the government at the start of this year launched a crackdown on subsidy frauds committed by the supposed domestic xEV manufacturers.

“Sales of passenger vehicles in China’s xEV market will continue to expand rapidly despite future subsidy cuts,” said Chang. “On the other hand, sales commercial vehicles are going to be impacted by the subsidy fraud cases as the government in response has raised certification requirement for domestic xEV manufacturers. Thus, sales of buses and other commercial transport vehicles in China’s xEV market may fall in 2017.”

With the lowering of the subsidy next year, TrendForce expects xEV demand in China will concentrate in the fourth quarter. Moreover, the country’s total xEV sales for 2016 are expected to arrive around 550,000 units mainly due to the rapid growth of the domestic passenger xEV market.

The U.S. and Japan are also witnessing steady growth in xEV sales during 2016. Following the slump of 2015, these two regional markets managed to make a sharp turnaround. Annual xEV sales in the U.S. are expected to grow to nearly 150,000 units in 2016 due to the hot demand for Tesla’s Model S and Model X. With China leading the market, TrendForce estimates that sales of xEVs worldwide for 2016 will exceed 950,000 units.