China auto market hits milestone

Half of all vehicles sold in China in July were either new pure electric vehicles (EV) or plug-in hybrids, industry data showed, a milestone that underscores how far the world’s biggest auto market has leapt ahead of Western counterparts in EV adoption.

Sales of so-called new energy vehicles (NEVs) jumped 37% last month from the same period a year earlier, accounting for a record 50.7% of car sales, data from the China Passenger Car Association (CPCA) showed.

NEV sales accounted for just 7% of total vehicle sales in China three years ago, but its heavy investments in EV supply chains have propelled the growth of domestic EV industry, leaving many established foreign brands scrambling to catch up.

By contrast, the share of electric and hybrid vehicle sales in the United States amounted to 18% in the first quarter of this year, according to the U.S. Energy Information Administration, a research firm.

The pace of growth for NEVs in China accelerated from a 28.6% surge in June. Sales of pure electric vehicles climbed 14.3% in July, up from 9.9% growth for June.

Solid growth in NEV sales helped some local brands including BYD and Li Auto (LI) set fresh monthly sales records in July.

But overall domestic car sales fell 3.1%, extending declines for a fourth straight month with consumer confidence weak as the economy struggles to gain momentum amid a prolonged crisis in the property market.

Weakness in the auto market prompted China’s state planning agency to announce in late July that cash subsidies for vehicle purchases would be doubled – up to 20,000 yuan ($2,785) per purchase – and would be retroactive to April when the subsidies were first introduced.

Additionally, some cities with curbs on car purchases have moved to relax restrictions. The capital city Beijing, for instance, announced last month it would offer to expand its NEV license quota by 20,000, the first easing of curbs since a strict quota system was put in place in 2011 to ease traffic congestion and improve air quality.

A 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 margins, with the CPCA’s secretary general Cui Dongshu expecting further stabilisation in August and September.

China’s top EV firm BYD continued to offer discounts in July, but in a less intensive manner than in the first half. It offered a price reduction of up to 17.3% on the hybrid SUV BAO 5 under its off-road Fangchengbao lineup at the end-July.

Vehicle exports in July rose 20% year on year, easing from an 28% increase in June, as China-made EVs brace for provisional EU tariffs, Cui said.