Half of all cars sold in China in July were electric or hybrid, marking a new era

China’s automotive industry has reached a significant milestone as sales of new energy vehicles (NEVs)—including pure electric vehicles (EVs) and plug-in hybrids—accounted for over half of all vehicles sold in July. According to the China Passenger Car Association (CPCA), NEVs comprised 50.7% of 1.73 million passenger car sales last month, marking a substantial leap in the world’s largest auto market.

This achievement highlights China’s rapid progress in adopting electric vehicles, surpassing Western markets considerably. Sales of NEVs surged by 37% year-on-year in July, a significant increase from the 28.6% growth recorded in June. Pure electric vehicle sales alone rose by 14.3% last month, up from the 9.9% growth seen in June.

China’s investment in its EV supply chains has been a driving force behind this growth. Just three years ago, NEVs accounted for only 7% of total vehicle sales in the country. Today, China’s domestic EV industry has outpaced many established foreign brands, forcing them to scramble to catch up. In stark contrast, the United States saw electric and hybrid vehicles makeup just 18% of vehicle sales in the first quarter of 2024, according to data from the U.S. Energy Information Administration.

Local brands have particularly benefited from the surge in NEV sales. BYD, one of China’s leading electric vehicle manufacturers, and Li Auto both set new monthly sales records in July. Despite the robust performance in the NEV segment, overall domestic car sales in China fell by 3.1%, marking the fourth consecutive month of decline. This downturn is largely attributed to weakened consumer confidence as the Chinese economy grapples with a prolonged property market crisis.

In response to the downturn, China’s state planning agency announced at the end of July that it would double cash subsidies for vehicle purchases to 20,000 yuan ($2,785) per purchase, retroactive to April when the subsidies were initially introduced. Additionally, some cities have begun easing restrictions on car purchases to stimulate demand. Beijing, for instance, announced an expansion of its NEV license quota by 20,000, the first relaxation of its strict quota system since it was implemented in 2011 to alleviate traffic congestion and improve air quality.

The fierce price competition among domestic brands, which had seen a race to offer newer and cheaper models, is beginning to ease as automakers seek to protect profit margins. Cui Dongshu, secretary general of the CPCA, expects further stabilization in the market during August and September. BYD, for example, continued to offer discounts in July but with less intensity compared to earlier in the year. The company reduced the price of its hybrid SUV BAO 5 by up to 17.3% under its off-road Fangchengbao lineup at the end of the month.

Vehicle exports from China also saw growth in July, rising 20% year-on-year. However, this was a slight slowdown compared to the 28% increase in June. Chinese-made EVs are now bracing for the impact of provisional EU tariffs, which could influence future export figures.

As China continues to lead the global shift towards electric vehicles, the impact of its domestic market dynamics on the international automotive landscape remains profound. The country’s aggressive push into NEVs not only reflects its environmental ambitions but also signals a new era in automotive innovation and competition.

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