Fifth consecutive monthly growth masks rising competition risks
China’s car sales rose 18.6% year-over-year in June to 2.1 million units, extending a five-month growth streak, according to the China Passenger Car Association (CPCA). First-half sales climbed 11.2% to 11.1 million vehicles, signaling sustained market momentum despite growing concerns among electric vehicle makers.
Sales of electric vehicles (EVs) and plug-in hybrids remained robust, surging 29.7% from June 2024 and accounting for 52.7% of total car sales. That’s up from a 28.2% share the previous month. However, major EV players showed signs of deceleration.
BYD, Li Auto signal weakening momentum
Local EV leader BYD saw its year-on-year sales growth slow to 11%, down from 14.1% in May. Li Auto’s performance was more dramatic, with sales plunging 24.1% in June after a 16.7% gain the month prior. Both companies had been among the few Chinese EV makers consistently profitable across full fiscal years.
Geely Auto raised its 2025 sales target by 11% to 3 million units but also experienced a slowdown, with sales growth easing to 42% from 46% in May. The figures point to growing strain across the sector.
Regulators warn of dangerous price war
“We’re facing a big dilemma,” said CPCA’s secretary-general Cui Dongshu, warning that intensifying competition could lead to “life-or-death” scenarios for some automakers. Chinese regulators have urged companies to end aggressive price wars, citing concerns over oversupply, weak consumer demand, and the impact of escalating U.S. tariffs.
Adding to those concerns, a Reuters investigation in June highlighted reports of new vehicles being exported overseas and reclassified as “used” to evade domestic sales pressure — a trend ongoing since 2019.
Mixed signals: Tesla rebounds, Xiaomi booms
Despite broader softness in the EV market, Xiaomi’s new YU7 SUV drew strong consumer interest, helping the tech giant gain ground in its automotive ambitions. Meanwhile, Tesla saw a partial recovery in China, with June sales rising 3.7% after a sharp 30% decline in May. The rebound followed the accelerated ramp-up of the refreshed Model Y at its Shanghai plant, reaching full production in just six weeks.
China’s auto exports also continued to rise, up 23.8% year-on-year in June, compared to 13.5% in May. Still, industry watchers remain cautious. Without structural solutions to overcapacity and domestic demand weakness, the sector may be headed for more volatility.