Brand New Energy

The surge in sales is partly driven by fierce competition and major technological innovation as new energy vehicles are ever more affordable and technologically attractive. Beneath the growth momentum, China’s automobile industry is experiencing major market reshuffles which will present both challenges and opportunities for automakers. The CAAM predicted that 2025 would see sales of domestic passenger vehicles rise by 4.9 percent to reach 28.9 million.

By comparison, domestic sales of gasoline and diesel-powered cars plummeted by 17 percent, reflecting an accelerated transformation toward electrification of China’s automobile industry.　

NEV sales accounted for 45.3 percent of total domestic new vehicle sales, an increase of 12 percentage points compared to 2023. Looking at monthly data, the domestic penetration rate of NEVs exceeded 50 percent for five months in the latter half of 2024. The penetration rate of new energy vehicles is projected to surpass the 50 percent threshold in 2025, way ahead of the 2035 target the Chinese government set.　

Chinese automakers are at the forefront of this transition toward electrification. BYD, China’s top EV producer, sold 4.27 million vehicles, including 4.25 million passenger cars, marking a 41.1 percent year-on-year increase in the global market. The figures include 417,204 cars sold overseas, up 71.9 percent on 2023. This performance established BYD as China’s top-selling automaker in China for the first time, while solidifying its position as the global leader in the NEV market.　

Other domestic automakers reported impressive growth. Geely Auto from Zhejiang Province sold 2.177 million vehicles in 2024, a 32 percent year-on-year increase, with NEV sales reaching 888,000 units, nearly double the previous year’s figure. Changan Auto from Chongqing sold 2.68 million vehicles, including over 730,000 NEVs, representing a 50 percent year-on-year increase. Chery Auto from Anhui Province set a new annual sales record, selling 2.60 million vehicles, a 38.4 percent increase, with NEV sales soaring by 232.7 percent to 583,600 units. These figures include exports, with the export ratios for Geely, Changan and Chery reaching 18.6 percent, 20 percent and 43.8 percent.　

China’s emerging EV brands also showed new growth momentum. Beijing-based Li Auto delivered 501,000 vehicles, up 33.1 percent year-on-year, while Chongqing-headquartered Seres saw a staggering 182.8 percent increase with 427,000 deliveries. Stellantis-backed Leapmotor, based in Hangzhou, reported delivery growth of 100 percent, and Shanghai-based NIO saw growth of 38.7 percent. Geely-owned Zeekr, also headquartered in Hangzhou, and Beijing-based Xiaomi Auto, the latter making its debut in the automotive market, delivered 222,100 and over 135,000 vehicles respectively. The figures underscore robust demand for innovative EV offerings. Their sales are mainly in China so far.

Sales of Chinese brands of passenger vehicles surpassed those of foreign brands for the first time in 2023, capturing a market share of 51.9 percent, according to data released by the China Automobile Dealers Association (CADA). With the strong performance in 2024, Chinese brands further consolidated their lead in China’s automobile market, expanding their share in the retail market for passenger vehicles to 60.5 percent.　

Besides their falling market share, absolute sales of almost all foreign brands in China have declined. According to CADA, total sales of passenger vehicles of foreign brands dropped by 13.4 percent in 2024.　

SAIC Volkswagen, a joint venture between Volkswagen AG and SAIC Motor Corp, reported on December 31, 2024, that it sold 1.66 million vehicles under the Volkswagen, Audi and Jetta brands in 2024. Despite remaining the top foreign automaker in China, its annual sales fell by 13 percent year-on-year.　

In June 2024, Japanese automakers Honda and Nissan carmakers announced plant closures and production halts in China due to declining demand. Nissan closed a plant in Changzhou, Jiangsu Province in June 2023, and Honda announced it would close one of its joint venture factories in October 2024 and suspend production at another the following month.　

Tesla was a rare exception among foreign brands, selling more than 657,000 cars in 2024 in the Chinese market, up by 8.8 percent from 2023. However, its share in China’s NEV market dropped from 7.8 percent in 2023 to 6 percent in 2024.　

Major established domestic State-owned brands also struggled. SAIC Motor founded in 1955 in Shanghai and China First Automobile Works Group (FAW) founded in 1953 in Northeast China’s Jilin Province, the top two performers in 2023, both reported a 20 percent decline in wholesale sales.　

“The changes in the Chinese market have exceeded the expectations of many domestic companies and multinational corporations. Their outdated business models have failed to keep up with market dynamics,” said Zhang Yongwei, vice chairman and secretary-general of China EV100, a non-governmental organization that promotes China’s EV industry, during a media briefing, referring to some companies’ tardiness in transitioning to NEVs.　

Zhang stressed it is inevitable that everyone in the industry will realize that electrification is the future of China’s automobile industry. He projected that the domestic NEV market will reach 15 million units in 2025, with a penetration rate exceeding 55 percent. But Zhang warned that as the market share of NEVs continues to grow, it could lead to a more saturated market, driving up the already intense competition among carmakers in China.

The result is that the profit margin of the entire automobile industry has steadily declined. The CPCA revealed that profit margins in China’s automobile industry dropped from 6.2 percent in 2020 to 5.0 percent in 2023. Amid intensified price wars, the margin fell further to 4.4 percent in the first 11 months of 2024, with November alone seeing a 35 percent drop from a year ago, with the profit margin shrinking to just 3.3 percent.　

According to a list compiled by 12365auto.com, a consumer car website, at least 35 automakers in China involving both domestic, emerging and foreign brands like Mitsubishi and Mazda, have either filed for bankruptcy, been acquired or ceased operations.　

The latest case is Hycan Automobile, an EV joint venture startup between Guangzhou Automobile Group (GAC) and NIO in 2017. The brand sold 18,941 and 18,559 vehicles in 2022 and 2023. But amid fierce price wars, sales fell off a cliff in 2024, with only 196 units across four models sold in May 2024. Reports indicated that the company had laid off most of its employees. In January, a court in Guangzhou, Guangdong Province ruled against the company in a lawsuit filed by its suppliers, and listed it as “defaulters,” indicating that the company is in its final death throes.