Policy Continuity Catalyzes Market Potential Release; New Energy Vehicle Penetration Nears 50% in July

On August 11, the China Association of Automobile Manufacturers (CAAM) held its monthly update, where the China Securities Journal disclosed that automobile sales in July totaled 2.593 million units. While this reflects a typical seasonal decline from the previous month, it also signifies a 14.7% increase compared to July of the previous year. Sales of new energy vehicles (NEVs) remained strong, reaching 1.262 million units and accounting for 48.7% of all vehicles sold.

Chen Shihua, CAAM’s Deputy Secretary-General, explained that July generally marks a slower period for the automotive sector, as manufacturers often halt production for scheduled equipment maintenance. Nevertheless, the national vehicle trade-in initiative continues to yield positive results, regulatory efforts to reduce excessive internal competition are progressing, and the release of new models has helped maintain market stability.

According to CAAM’s figures, vehicle production in July stood at 2.591 million units, while sales reached 2.593 million units. These numbers represent month-over-month declines of 7.3% and 10.7%, respectively, but year-over-year increases of 13.3% and 14.7%. Passenger vehicle production and sales were recorded at 2.293 million and 2.287 million units, showing monthly decreases of 6% and 9.8%, yet annual growth of 13% and 14.7%. Domestic brands led the passenger vehicle segment with 1.604 million units sold, marking a 21.3% increase from the previous year and raising their market share to 70.1%, up 3.8 percentage points from July 2024.

In the NEV category, July production reached 1.243 million units, while sales hit 1.262 million units—up 26.3% and 27.4% year over year. From January through July, NEV production totaled 8.232 million units, and sales reached 8.220 million units, reflecting increases of 39.2% and 38.5% compared to the same period last year. NEVs now represent 45% of all new vehicle sales, underscoring their growing importance in supporting domestic consumption.

NEV exports have become a major contributor to China’s overall vehicle shipments abroad. In July, total vehicle exports reached 575,000 units—a 2.8% decline from June but a 22.6% increase compared to July 2024. Exports of traditional fuel-powered vehicles dropped both month over month and year over year to 350,000 units. In contrast, NEV exports rose to 225,000 units, reflecting a 10% monthly increase and a 120% surge from the previous year.

Seven of the top ten vehicle exporters posted growth in July. Chery led with 119,000 units exported, a 31.9% increase year over year, representing 20.7% of total exports. BYD (002594) saw the most significant rise, shipping 81,000 units—160% more than in July 2024.

Domestic automakers are accelerating their global expansion strategies. Leapmotor experienced a sharp increase in exports during the first half of the year and has set a target of over 50,000 units for 2025. With local assembly operations already in place, the company expects to gain substantial traction in European markets by 2026.

Despite the seasonal slowdown, manufacturers continued to unveil new models in July and early August, especially in the SUV segment. On August 8, Geely Auto launched the Galaxy A7, offering seven variants powered by its next-generation Thor EM-i hybrid system. The company aims to surpass one million annual sales across the Galaxy series. XPeng Motors introduced the updated P7 on August 6, featuring 2,250 TOPS of computing power and a 5C fast-charging AI battery. Chairman He Xiaopeng anticipates the new P7 will reclaim its flagship status and rank among the top three electric sedans priced above RMB 200,000.

Earlier in July, several SUVs entered the market, including the XPeng G7, Ledo L90, Leapmotor C11, Li Auto i8, Lantu FREE+, and the refreshed Geely Galaxy E5. Li Auto, which delayed its pure-electric SUV rollout following last year’s MEGA launch, released the i8 on July 29 and plans to introduce the i6 in September. The performance of these models will be key to evaluating the company’s dual-energy strategy.

He Xiaopeng emphasized that success in any vehicle category—sedans, SUVs, or MPVs—requires eliminating major flaws while highlighting core strengths. He believes future competition will be driven by comprehensive product and technical capabilities rather than marketing strategies alone.

On the policy front, the central government has issued a third round of ultra-long-term special treasury bonds to support the trade-in subsidy program, with a fourth round scheduled for October. Local governments are expected to allocate these funds efficiently through the end of the year to boost consumer confidence and maintain sales momentum in the second half of 2025.

Under current incentives, NEVs purchased between January 1, 2026, and December 31, 2027, will receive a 50% reduction in vehicle purchase tax. Chen Shihua expects this policy to accelerate consumer buying in the coming months, making the industry’s goal of 16 million NEV units in 2025 increasingly achievable.

Lin Yun, Partner at Roland Berger, noted that while tax incentives help attract buyers, the true competitive edge for NEVs—especially in the premium segment—comes from advanced driving assistance systems, innovative cockpit technology, and distinctive design. He stressed that beyond government support, automakers must focus on product differentiation, maintain cost efficiency through vertical integration, and build strong technology and service ecosystems to remain competitive.