China is making significant strides in the adoption of new energy vehicles (NEVs), with over half of all vehicles sold in the country in July being NEVs. This includes both pure electric vehicles (EVs) and plug-in hybrids, according to the China Passenger Car Association (CPCA). This surge in NEV sales represents a 37% increase compared to the same period last year, reaching a record 50.7% of total car sales. This milestone underscores China’s rapid progress in EV adoption, outpacing Western markets like the United States, where EV and hybrid sales only accounted for 18% of total vehicle sales in the first quarter of 2024.
One of the key factors driving China’s remarkable growth in NEVs is the heavy investments made in its EV supply chains. This has enabled domestic brands like BYD and Li Auto to achieve fresh monthly sales records in July. Despite the surge in NEV sales, overall domestic car sales in China fell by 3.1%, continuing a four-month decline. This decline is attributed to weak consumer confidence amid economic challenges, including a prolonged property market crisis.
To combat the slowdown in the auto market, China’s state planning agency announced in late July that cash subsidies for vehicle purchases would be doubled, up to approximately $2,785 per purchase, retroactive to April when the subsidies were first introduced. Additionally, cities with restrictions on car purchases, such as Beijing, are relaxing these limits to boost NEV sales. Beijing, for example, has expanded its NEV license quota by 20,000 units, marking the first easing of restrictions since 2011.
The intense price war among domestic brands, which saw significant discounts and competition on newer models, is also showing signs of stabilization. BYD, China’s leading EV firm, continued to offer discounts in July, albeit less aggressively than in the first half of the year. The company implemented a price reduction of up to 17.3% on its hybrid SUV BAO 5. Furthermore, vehicle exports in July rose by 20% year-on-year, although at a slower pace than June’s 28% increase. This increase in exports comes as Chinese-made EVs prepare for potential tariffs from the European Union.
Overall, China’s dominance in the NEV market is evident through its record-breaking sales figures and strategic initiatives to boost adoption. With continued investments in EV infrastructure and policy support, China is poised to maintain its position as a global leader in the electric vehicle industry.