Chinese auto market sets new benchmark as EVs, hybrids make up half of July sales

The data from the Chinese auto industry has revealed a significant milestone in the adoption of electric vehicles (EVs) and plug-in hybrids in China, the world's largest automobile market. In July, half of all vehicle sales in China were either new pure electric vehicles or plug-in hybrids, showcasing the rapid progress the country has made in transitioning towards electric mobility, outpacing its Western counterparts.

According to the data from the China Passenger Car Association (CPCA), sales of these so-called "new energy vehicles" (NEVs) jumped 37 per cent in July compared to the same period a year earlier, accounting for a record 50.7 per cent of total car sales. This is a remarkable turnaround from just three years ago when NEV sales accounted for only 7 per cent of China's total vehicle sales.

China's heavy investments in EV supply chains have been a driving force behind the exponential growth of the domestic EV industry, leaving many established foreign brands struggling to catch up. In contrast, the share of electric and hybrid vehicle sales in the United States amounted to only 18 per cent in the first quarter of this year, as per data from the U.S. Energy Information Administration.

The pace of growth for NEVs in China has accelerated, with a 28.6 per cent surge in June followed by a 37 per cent jump in July. Sales of pure electric vehicles climbed 14.3 per cent in July, up from 9.9 per cent growth in June.

This strong performance in NEV sales has helped some local Chinese brands, such as BYD and Li Auto, set fresh monthly sales records in July. However, the overall domestic car sales in China fell by 3.1 per cent, extending declines for a fourth straight month, as consumer confidence remains weak amid the struggling economy and the prolonged crisis in the property market.

In response to the weakness in the auto market, China's state planning agency has announced that cash subsidies for vehicle purchases will be doubled, up to 20,000 yuan (USD 2,785) per purchase, and will be retroactive to April when the subsidies were first introduced. Some cities with restrictions on car purchases have moved to relax these restrictions, such as Beijing, which has announced a 20,000-unit expansion of its NEV license quota, the first easing of curbs since the strict quota system was put in place in 2011 to address traffic congestion and air quality concerns.

The protracted price war that had seen a flood of domestic brands competing on newer and cheaper models is also easing, as automakers seek to protect their profit margins. The CPCA's secretary general, Cui Dongshu, expects further stabilisation in the Chinese auto market in August and September.

Despite the challenges, China's top EV firm, BYD, continued to offer discounts in July, although in a less intensive manner compared to the first half of the year. The company offered a price reduction of up to 17.3 per cent on the hybrid SUV BAO 5 under its off-road Fangchengbao lineup at the end of July.

China's vehicle exports in July rose by 20 per cent year-on-year, though easing from a 28 per cent increase in June. This is due to China-made EVs bracing for provisional EU tariffs, as per Cui's comments.