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Electric vehicles are expected to outsell internal combustion engine cars in China for the first time next year, in a historic turning point that puts the world’s biggest car market years ahead of Western rivals.
China will smash international forecasts and Beijing’s official targets with domestic sales of electric cars – including pure battery and plug-in hybrids – growing by about 20 percent year-on-year to more than 12 million cars by 2025, according to the latest estimates provided to the Financial Times by four investment banks and research groups. The figure would more than double the 5.9 million sold in 2022.
Meanwhile, sales of conventionally powered cars are expected to fall by more than 10 percent next year to less than 11 million, reflecting a nearly 30 percent decline from 14.8 million in 2022.
In the meantime, E.V sales growth has slowed in Europe and the US, reflecting the aging auto industry’s slow adoption of new technology, uncertainty about government subsidies and increasing protectionism against imports from China.
Robert Liew, head of Asia-Pacific renewable energy research at Wood Mackenzie, said China’s EV milestone signaled its success in domestic technology development and securing global supply chains for critical resources needed for electric cars and their batteries. The scale of the industry meant sharp reductions in manufacturing costs and lower prices for consumers.
“They want to electrify everything,” Liew said. “No other country comes close to China.”
Although China’s electric car sales growth has slowed from a post-pandemic frenzy, forecasts suggest Beijing’s official 2020 goal of electric cars accounting for 50 percent of car sales by 2035 will be achieved 10 years ahead of schedule. .
Industry forecasts were provided to the FT by investment banks UBS and HSBC, as well as research groups Morningstar and Wood Mackenzie.
They suggest that in the next decade, factories set up in China to produce tens of millions of cars with traditional engines will have almost no domestic market to serve.
They also highlight how the rapid rise of China’s electric car industry is now threatening the national manufacturing champions of Germany, Japan and the United States.
With China’s electric car market on track to grow close to 40 percent by 2024, the market share of foreign cars fell to a record low of 37 percent — a sharp decline from 64 percent in 2020, according to data from Automobility, a Shanghai-based consultancy.
In this month alone, GM wrote down more than $5 billion of its business value in China; the holding company behind Porsche warned of a write-down of its Volkswagen stake of up to €20 billion; and arch-rivals Nissan and Honda said they were responding to a “drastically changing business environment” with a merger.
Chinese automakers face their own internal rivalry. Yuqian Ding, a veteran Beijing-based analyst at HSBC, said that while electric cars were now a “strategically important” part of China’s new, high-tech economy, intense competition was expected to “squeeze out” more players from the market as the industry consolidates.
“While China’s domestic EV sector is clearly booming, it is also facing slowing growth – from a very high base – model oversupply, intense competition and a price war,” she said. “The long-term direction is clear – China’s electric car is unstoppable.”
Tu Le, founder of consultancy Sino Auto Insights, said the industry was only at the “beginning” of a period of unprecedented upheaval.
Vincent Sun, an equity analyst covering China’s auto sector for investment research group Morningstar, noted that several multinational automakers, including Germany’s Volkswagen, did not expect to release major new EV models in China until late 2025 or 2026.
HSBC estimated that around 90 new car models had been planned for launch by manufacturers in China in the fourth quarter of 2024 – about one a day – and almost 90 percent were electric cars.
Still, Paul Gong, head of China automotive research at UBS, warned there was some uncertainty around China’s broader economic policy heading into 2025 and predicted the market would have a “weak start to the year” after a robust finish to 2024.
But he added: “We expect . . . a sharp increase in purchases at the end of 2025, driven by the end of subsidies and the introduction of a 5 percent purchase tax on electric vehicles in 2026 – compared to 0 percent until the end of 2025.”
