In August, the adoption rate of electric vehicles (EVs) in mainland China surpassed 50% for the second month in a row, despite a decline in overall vehicle sales in the world's largest automotive market. Sales of electric vehicles including battery-powered models and hybrids with both petrol and battery engines rose by 43.2% to 1.03 million units last month, accounting for 53.9% of total nationwide deliveries, according to the China Passenger Car Association (CPCA). This marks the second consecutive month that EVs have outsold traditional petrol-powered cars, following an adoption rate of 51.1% in July.
The data underscores how quickly China’s vehicle owners have shifted to electrification, as dozens of carmakers jockey to offer long-range, fast-charging EVs with smart applications at steep discounts. The pace of adoption may even surpass UBS’ forecast, which sees three of every five new vehicles to be powered by electricity by 2030.
The shifting pattern casts a pall over the assemblers of vehicles that run on internal combustion engines, where sales shrank to 870,000 units last month, 28 percent fewer than a year ago. Sales in the overall market fell by 1 percent to 1.91 million units last month, the CPCA’s data showed.
According to the CPCA, government subsidies have made electric vehicles (EVs) more appealing. Buyers can receive a 20,000 yuan (US$2,808) incentive for replacing a petrol-powered vehicle with an EV, as announced by the government in July. This amount is double the incentive provided in April. The current subsidy for transitioning from petrol engines to electric is 15,000 yuan per vehicle.
“Since EV buyers can receive 5,000 yuan more than the buyers of petrol car, electric car assemblers stand to benefit from the new policy”, said Eric Han, a senior manager at Suolei, an advisory firm in Shanghai. “A rapid increase of EV ownership has made it difficult for many conventional carmakers to survive the fierce competition”. China is also the world’s largest EV market where sales of pure electric and hybrid cars represented 65 percent of the global total in the first half of this year.
In August, sales of hybrid electric vehicles (EVs) jumped 96.9% year-on-year to 444,000 units, accounting for 43.2% of total EV sales, though this is a decrease of 1.9 percentage points from the previous month. BYD, the world's leading EV manufacturer, achieved a record delivery of 373,083 cars both domestically and internationally in August, representing a 36% increase compared to the same period in 2023. The Shenzhen-based company surpassed all other EV and petrol car manufacturers in sales.
Despite the growing adoption of electric vehicles (EVs), most Chinese EV manufacturers, with the exceptions of BYD and Li Auto—Tesla's closest competitor in mainland China—have yet to achieve profitability due to an intense discounting war. Last month, BYD reported that its gross margin shrank by 3.2 percentage points to 18.7% in the second quarter of 2024 as a result of price reductions. Similarly, Li Auto saw its gross margin decline by 1.1 percentage points to 19.5% for the three months ending in June, attributed to the customer incentives it provided.