China dominates electric cars and leaves the West years behind

Report points to 20% growth in electric vehicle sales in the Asian giant, exceeding Beijing targets and global forecasts

Electric vehicles are expected to surpass sales of cars with internal combustion engines in China for the first time next year, marking a historic inflection point that puts the world’s biggest auto market years ahead of its Western competitors.

China is poised to surpass international forecasts and Beijing’s official targets with domestic sales of electric vehicles — including pure batteries and plug-in hybrids — growing by about 20% annually to more than 12 million units by 2025, according to estimates recent information provided to the Financial Times by four investment banks and research groups. This number would be more than double the 5.9 million sold in 2022.

At the same time, sales of fossil fuel cars are expected to fall more than 10% next year to less than 11 million, reflecting a drop of nearly 30% from 2022’s 14.8 million.

Meanwhile, growth in electric vehicle sales in Europe and the United States has slowed, reflecting the traditional automotive industry’s resistance to adopting new technologies, uncertainty about government subsidies and increasing protectionism against imports from China.

Robert Liew, director of Asia-Pacific renewable energy research at Wood Mackenzie, highlighted that China’s electric vehicle milestone signals the country’s success in domestic technological development and securing global supply chains for critical resources needed for vehicles. electrical appliances and their batteries. The industry’s reach has resulted in a significant reduction in manufacturing costs and lower prices for consumers.

“They want to electrify everything,” Liew said. “No other country comes close to China.”

Although the pace of growth in electric vehicle sales in China has slowed following the post-pandemic frenzy, forecasts indicate that Beijing’s official target, set in 2020, for electric vehicles to account for 50% of car sales by 2035 will be achieved a decade in advance.

Industry forecasts, provided to the Financial Times by UBS, HSBC, Morningstar and Wood Mackenzie, suggest that in the next decade, Chinese factories destined to produce millions of cars with traditional engines will have almost no domestic market to serve.

These predictions also highlight how the rapid rise of China’s electric vehicle industry threatens national automotive manufacturing champions Germany, Japan and the United States.

As China’s electric vehicle market is on track for annual growth of nearly 40% in 2024, the market share of foreign-brand cars has fallen to a record low of 37% — a sharp drop from 64% in 2020. , according to data from Automobility, a consultancy based in Shanghai.

This month alone, GM reduced the value of its business in China by more than $5 billion; the holding company behind Porsche warned of a devaluation of up to €20 billion in its stake in Volkswagen; and rivals Nissan and Honda announced a merger to deal with the “drastically changing business environment”.

Chinese car manufacturers also face internal rivalries. Yuqian Ding, a veteran Beijing-based analyst with HSBC, said that while electric vehicles are now a “strategically important” part of China’s new high-tech economy, intense competition will likely lead to more players leaving the market as the sector consolidates.

“While China’s domestic electric vehicle sector is clearly flourishing, it is also facing slower growth — from a very high base — too many models, intense competition and a price war,” she said. “The long-term direction is clear — the strength of China’s electric vehicle sector is unstoppable.”

Tu Le, founder of consultancy Sino Auto Insights, said the industry is just “at the beginning” of a period of unprecedented transformation.

Vincent Sun, a stock analyst specializing in the Chinese auto sector for investment research group Morningstar, noted that several multinational automakers, including Volkswagen, do not expect to launch significant new electric vehicle models in China before the end of 2025 or 2026.

HSBC estimated that around 90 new car models were planned for launch by manufacturers in China in the fourth quarter of 2024 — almost one a day — and that almost 90% of them would be electric vehicles.

Still, Paul Gong, head of Chinese automotive research at UBS, warned there was some uncertainty about China’s broader economic policy in 2025 and predicted the market would have a “weak start to the year” after a robust end to 2024.

He added: “We expect a strong increase in purchases at the end of 2025, driven by the end of subsidies and the introduction of a 5% purchase tax on electric vehicles in 2026 — compared to 0% by the end of 2025.”

With information from the Financial Times*