China's EV market reaches a tipping point - electric cars outsell ICE vehicles
China's automotive market witnessed a remarkable milestone in July 2024. For the first time, electric vehicles and plug-in hybrids combined to outsell their gasoline-powered counterparts. This momentous occasion clearly shows the rapid pace of EV adoption in the world's largest auto market, fueled by a mix of government incentives and a growing domestic EV industry.
Data from the China Passenger Car Association (CPCA) reveals that sales of new energy vehicles (NEVs), a term encompassing both EVs and PHEVs, surged by an impressive 37% in July compared to the same period last year and managed a 50.7% share of the total car sales. Sales of pure electric vehicles are up 14.4% YoY in July.
For reference three years ago NEVs accounted for a mere 7% of total vehicle sales in China. The nation's steadfast commitment to investing in EV supply chains has catapulted the domestic industry to new heights, leaving many established foreign brands scrambling to keep pace. This starkly contrasts with the situation in the United States, where the combined share of electric and hybrid vehicle sales languished at 18% in the first quarter of this year.
In late July, China doubled cash incentives for EV purchases to a generous RMB 20,000 ($2,785) per vehicle and made them retroactive to April when they were first announced. NEVs are exempt from sales tax up to RMB 30,000 ($4,175) in 2024 and 2025. A government scrappage scheme further sweetens the deal, offering consumers RMB 20,000 ($2,540) for replacing their gas guzzlers with NEVs.
Local governments are also joining the EV transition. Beijing, for instance, recently announced a significant expansion of its NEV license quota, marking the first relaxation of restrictions since the introduction of the quota system in 2011. These measures, couples with the increasingly diverse market providing an ever increasing number of options, are expected to further boost NEV sales in the coming months.
While the overall domestic car sales in China experienced a slight dip of 3.1% in July, extending declines for a fourth consecutive month, the surge in NEV sales provides a glimmer of hope for the market. Brands like BYD and Li Auto even set fresh monthly sales records in July, buoyed by the strong demand for NEVs.
Overseas China's vehicle exports in July saw a 20% year-on-year increase, albeit slightly lower than the 28% jump in June, as Chinese-made EVs brace for provisional EU tariffs. The July sales figures are a turning point for China's automotive landscape. With EVs and PHEVs now accounting for half of all car sales, it's clear that the nation's transition to electric mobility is gaining momentum.
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