Auto manufacturers in China, under Beijing's instruction, curtail cost reductions for electric vehicles as competition with steep discounts takes a negative toll.
China's Electric Vehicle Market: Growth and Challenges
China's electric vehicle (EV) market is experiencing strong growth, with Mainland Chinese companies leading the global EV sector, according to analysts. By mid-2025, EVs have captured about 50-53% of the new car market, with BEVs alone representing one-third of all new car sales in June. Year-to-date sales exceed 8 million units, and projections suggest over 10 million EVs will be sold in China for 2025 [1][2][3].
However, the market shows signs of cooling off. Total EV deliveries dipped by 5% month-over-month in July after consistently growing, indicating a possible peak in short-term demand. This slowdown is attributed to consumers becoming more price-sensitive amid a price war, with average discounts around 10% for EVs, albeit lower than discounts for internal combustion engine (ICE) vehicles at 23% [1][2].
In response, the government has intervened, warning manufacturers that steep price cuts could invite penalties. The aim is to curb destructive competition and price slashing that might hurt the industry's sustainable growth [2]. Overcapacity has emerged as a concern, as the rapid influx of new EV models and manufacturers has produced intense competition and pressure on profit margins, especially for smaller or less established players.
Leading automakers reflect the market structure. BYD remains the dominant player with around 28-29% market share, followed by Geely and Changan, with Tesla holding a smaller but notable market share. Overall, Chinese manufacturers dominate the market, especially in the expanding EV segment [3][5].
The future outlook for the Chinese EV market is expected to be one of continued growth, albeit at a slower pace compared to the explosive growth seen earlier in the decade. NEVs are projected to constitute an increasing share of vehicles on the road, exceeding 10% penetration by 2025 and moving towards a market where more than half of all new vehicle sales will be plug-ins within a few years [3].
Continued government regulation will likely enforce more disciplined pricing strategies and discourage unsustainable discount wars. Market consolidation may occur, where weaker players exit or merge, leaving a more stable ecosystem led by a few strong domestic brands and regulated competition [2][5]. Innovation in battery technology, charging infrastructure, and vehicle models will remain key drivers alongside consumer demand stabilization [4].
In late May, the Chinese government intervened in the automotive market over concerns that price competition could jeopardise the EV sector. The intervention was not related to steep discounts offered by Chinese carmakers, as they had not offered such discounts. The auto sector in China is still grappling with overcapacity, with industry-wide discounts reaching a record high of over 17% in May, June, and early July, the highest since 2017 [4]. Nick Lai, head of auto research in Asia-Pacific at JPMorgan, stated that the high discounts are due to overcapacity [4].
In summary, the Chinese EV market is large and rapidly evolving, currently facing the twin challenges of overcapacity and fierce price competition. Government measures are being actively implemented to address these issues and ensure the industry's long-term healthy development while sustaining China's position as the world's largest EV market [1][2][3][5].
- As China's EV market continues to grow, the integration of advanced technology, particularly in battery technology, will play a significant role in maintaining the industry's competitive edge.
- The sports of Formula E, an all-electric racing series, has grown in popularity as it showcases the latest advancements in EV technology and fosters innovation within the industry.
- The financial sector is taking an increasing interest in the EV market, with many institutions exploring investments in energy companies focused on renewable resources to support the manufacturing of EVs and the development of EV infrastructure.
