EVs or hybrids accounted for half of the new car sales in China last month.

In July, an impressive milestone was reached in the Chinese automotive industry, with half of all vehicles sold being new pure electric vehicles (EV) or plug-in hybrids. This highlights the significant lead that the world’s largest auto market has over its Western counterparts in terms of EV adoption.

According to data from the China Passenger Car Association (CPCA), sales of new energy vehicles (NEVs) surged by 37% last month compared to the same period last year, accounting for a record-breaking 50.7% of total car sales. Just three years ago, NEVs only made up 7% of vehicle sales in China, demonstrating a rapid shift in consumer preference towards electric vehicles.

The growth of the domestic EV industry in China has been largely driven by heavy investments in EV supply chains. This has led to many established foreign brands struggling to keep pace with the rapid developments in the Chinese market. In comparison, the share of electric and hybrid vehicle sales in the United States stood at just 18% in the first quarter of this year, highlighting the significant lead that China has in EV adoption.

The pace of growth for NEVs in China accelerated significantly in July, with sales of pure electric vehicles experiencing a 14.3% increase. Some local brands such as BYD and Li Auto set new monthly sales records, indicating strong consumer demand for electric vehicles.

Despite the growth in NEV sales, overall domestic car sales in China declined by 3.1% in July, marking the fourth consecutive month of declines. To stimulate consumer demand, China’s state planning agency announced a doubling of cash subsidies for vehicle purchases, in addition to relaxing restrictions on car purchases in some cities.

Moreover, a protracted price war among domestic brands is beginning to ease as automakers focus on protecting margins. China’s top EV firm BYD, for example, continued to offer discounts in July but in a less intensive manner than in the first half of the year. The company offered a price reduction of up to 17.3% on the hybrid SUV BAO 5 under its off-road Fangchengbao lineup.

Looking ahead, vehicle exports in July rose by 20% year on year, although this growth rate has slightly eased from the previous month. Chinese-made EVs are also bracing for provisional tariffs from the EU, indicating potential challenges in the global market. Overall, the Chinese automotive industry continues to show strong momentum in EV adoption and innovation, setting a benchmark for the rest of the world to follow.