China has reached a significant milestone in the adoption of electric vehicles (EVs), with data from the China Passenger Car Association (CPCA) showing that in July, half of all vehicles sold in the country were either new pure EVs or plug-in hybrids. This achievement underscores how far China has surpassed Western counterparts in terms of EV adoption.
The growth in sales of new energy vehicles (NEVs) in China has been impressive, with a 37% increase last month compared to the same period a year earlier. NEVs accounted for a record 50.7% of car sales in July, a vast improvement from just 7% three years ago. This growth can be attributed to China’s heavy investments in EV supply chains, which have propelled the domestic EV industry forward and left many established foreign brands struggling to catch up.
In comparison, the United States lags behind China in terms of EV sales, with electric and hybrid vehicles accounting for only 18% of vehicle sales in the first quarter of this year, according to the U.S. Energy Information Administration. China’s pace of growth for NEVs accelerated from a 28.6% surge in June, with sales of pure electric vehicles increasing by 14.3% in July.
This robust growth in NEV sales has benefited local brands such as BYD and Li Auto, with both companies setting new monthly sales records in July. However, despite the success in the NEV market, overall domestic car sales in China fell 3.1%, extending a decline for a fourth consecutive month. Weak consumer confidence, combined with an economy struggling to gain momentum and a crisis in the property market, have contributed to this decline.
To stimulate the auto market, China’s state planning agency announced in late July that cash subsidies for vehicle purchases would be doubled to 20,000 yuan ($2,785) per purchase, retroactive to April when the subsidies were first introduced. Additionally, there have been efforts to relax restrictions on car purchases in some cities. Beijing, for instance, announced that it would expand its NEV license quota by 20,000, marking the first easing of curbs since the implementation of a strict quota system in 2011.
Furthermore, the protracted price war that saw domestic brands competing on newer and cheaper models is beginning to ease. Automakers are seeking to protect their margins, and the CPCA’s secretary general, Cui Dongshu, expects further stabilization in the market in the coming months.
In terms of international trade, Chinese vehicle exports saw a 20% increase in July compared to the previous year. However, this growth rate is slower than the 28% increase seen in June, as China-made EVs prepare for provisional tariffs from the European Union. These tariffs could impact the export market for Chinese EVs.
In conclusion, China’s auto market has made significant progress in EV adoption, with half of all vehicles sold in July being either new pure EVs or plug-in hybrids. This growth can be attributed to China’s heavy investments in EV supply chains, which have propelled the domestic EV industry forward. While the overall domestic car sales have declined for a fourth consecutive month, measures such as increased subsidies and relaxed restrictions on car purchases are being implemented to stimulate the market. The easing of the price war among domestic brands and the anticipated stabilization of the market in the coming months provide further optimism. However, challenges lie ahead, particularly in the form of potential tariffs on Chinese EV exports to the European Union.
