China’s EV sales account for more than 50 per cent sales alone

In August, China witnessed a significant milestone in its automotive industry as electric vehicles (EVs) accounted for more than half of all vehicle sales for the second consecutive month. This achievement occurred despite an overall decline in vehicle sales across the world's largest automotive market.

According to data from the China Passenger Car Association (CPCA), sales of electric vehicles – a category that encompasses both fully battery-powered models and hybrid vehicles combining petrol and battery engines – experienced a substantial increase of 43.2 per cent, reaching 1.03 million units in August. This impressive figure represented 53.9 per cent of total nationwide vehicle deliveries, marking the second month in a row where EVs outsold traditional petrol-powered vehicles. For comparison, the EV adoption rate in July stood at 51.1 per cent.

This data shows the rapid pace at which Chinese consumers are embracing electric mobility. The shift is being driven by fierce competition among numerous carmakers, who are vying to offer EVs with extended range, rapid charging capabilities, and advanced smart features, often at significantly discounted prices. The speed of this transition may even surpass projections made by financial institutions such as UBS, which had forecast that three out of every five new vehicles would be electrically powered by 2030.

The accelerating adoption of EVs is casting a shadow over manufacturers of internal combustion engine vehicles. Sales of traditional petrol-powered cars dropped to 870,000 units in August, representing a substantial 28 per cent decrease compared to the same period last year. The overall automotive market experienced a slight contraction, with total sales declining by 1 per cent to 1.91 million units in August, as reported by the CPCA.

Government incentives have played a crucial role in making EVs more attractive to consumers. The CPCA noted that buyers can receive up to 20,000 yuan (approximately USD 2,808) per vehicle when replacing a petrol-powered car with an EV, following a July announcement that doubled the previous incentive from April. Currently, the subsidy for switching from petrol engines to electric vehicles stands at 15,000 yuan per vehicle.

Eric Han, a senior manager at Suolei, an advisory firm based in Shanghai, commented on the impact of these incentives, "Since EV buyers can receive 5,000 yuan more than the buyers of petrol cars, electric car assemblers stand to benefit from the new policy. A rapid increase of EV ownership has made it difficult for many conventional carmakers to survive the fierce competition."

China's dominant position in the global EV market is further emphasised by the fact that sales of pure electric and hybrid cars in the country accounted for 65 per cent of the global total in the first half of this year.

Breaking down the EV sales figures for August, hybrid EVs experienced a remarkable year-on-year surge of 96.9 per cent, reaching 444,000 units. This represents 43.2 per cent of total EV sales, a slight decrease of 1.9 percentage points from the previous month.

BYD, the world's largest EV manufacturer, achieved a record-breaking performance in August, delivering 373,083 cars to customers both domestically and internationally. This figure represents a 36 per cent increase compared to the same period in 2023, solidifying BYD's position as the leading seller among both EV and petrol car manufacturers.

However, despite the growing adoption of EVs, most Chinese electric car manufacturers – with the exceptions of BYD and Li Auto, Tesla's closest competitor in mainland China – are yet to achieve profitability. This is largely due to an intense price war in the market.

BYD reported last month that its gross margin had narrowed by 3.2 percentage points to 18.7 percent in the second quarter of 2024, a direct result of price reductions. Similarly, Li Auto saw its gross margin contract by 1.1 percentage points to 19.5 percent in the quarter ending June, attributed to customer incentives.