For the first time ever, the majority of new cars sold last month in China were electric or hybrid.
China has just hit a major milestone in the automotive world: for the first time ever, electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs) outsold traditional gas-powered cars. In July 2024, these new energy vehicles (NEVs), as they’re known in China, made up 50.7% of all car sales in the country, marking a significant shift in the world’s largest auto market.
This surge in NEV sales is a clear sign of how quickly the landscape is changing. Just three years ago, EVs and PHEVs accounted for only 7% of total car sales in China. Now, thanks to generous government incentives and heavy investments in the EV supply chain, these vehicles have become the dominant force in the market.
In July alone, sales of NEVs jumped 37% compared to the same time last year. This growth comes even as the overall car market in China has seen a bit of a slump. Total car sales in the country fell by 3.1% in July, marking the fourth consecutive month of declining sales. But while traditional gas-powered vehicles are struggling, NEVs are thriving, with sales of EVs specifically up 14.3% in July and 9.9% in June.
The Chinese government has played a big role in driving this shift. In late July, the government doubled cash incentives for EVs to 20,000 yuan (around $2,785) and made these incentives retroactive to April. NEVs are also exempt from sales tax up to 30,000 yuan ($4,175) for the next couple of years. On top of that, there’s a scrappage scheme offering 20,000 yuan ($2,540) to consumers who replace their old gas cars with NEVs. These incentives have made EVs and PHEVs much more attractive to Chinese buyers, fueling their rapid adoption.
Local governments are getting in on the action, too. In Beijing, for instance, the city expanded its NEV license quota by 20,000 in July, the first increase since 2011. This move is part of an effort to reduce air pollution and traffic congestion while also encouraging more people to switch to cleaner, more efficient vehicles.
Meanwhile, across the Pacific in the United States, the adoption of EVs and hybrids is progressing at a slower pace. In the first quarter of 2024, EVs and hybrids made up 18% of the U.S. vehicle market, far behind China’s numbers. One of the reasons for this difference is the steep tariffs that prevent Chinese automakers from bringing their EVs and PHEVs to the U.S. market. With these tariffs unlikely to change anytime soon, it’s clear that the U.S. and China are on very different paths when it comes to the future of transportation.
While China is rapidly embracing the shift to electric vehicles, the rest of the world, including the U.S., is watching closely. The question now is whether other countries will follow China’s lead and how soon they’ll catch up in the race toward a more sustainable automotive industry.
