You know how demand for electric vehicles isn’t as strong as was predicted years ago, causing carmakers to rethink their electrification strategies? Yeah, that’s not happening in China, where sales of EVs are expected to overtake those of their internal combustion engined counterparts by next year, a full decade ahead of schedule – if a report by Financial Times is to believed.
The publication, citing forecasts from major banks and analysts such as UBS, HSBC, Morningstar and Wood Mackenzie, says that sales of electrified vehicles in the Middle Kingdom – including battery EVs and plug-in hybrids – are set to exceed 12 million units by 2025, a whopping 20% year-on-year growth.
This contrasts with sales of ICE vehicles that are tipped to drop by 10% to under 11 million, meaning that China – which in 2020 targeted a 50% EV market share by 2035 – reaches its goal ten years early.
Pricing is a key reason Chinese buyers are flocking towards EVs, with Wood Mackenzie Asia-Pacific renewables research director Robert Liew attributing this to massive reductions in manufacturing costs through the industry’s sheer scale. The advancement of domestic technology and the securing of global supply chains for critical resources for cars and batteries have also been instrumental in China’s EV sales success. “They want to electrify everything. No other country comes close to China,” he said.
The surge in EV sales – on track to grow by 40% this year alone – has come at the cost of the usual giants from Japan, Europe and the US. The market share of foreign brands has shrunk to a record low of 37%, far below the 64% enjoyed by these firms back in 2020, according to Shanghai-based consultancy Automobility.
It’s not all rosy for Chinese carmakers, however. Despite what it looks like from the outside, this meteoric growth is slowing, and an oversupply of models, intense competition and a costly (pun fully intended) price war is threatening to squeeze some smaller names out of the market, said Beijing-based HSBC analyst Yuqian Ding. “The longer-term direction of travel is clear – China’s EV juggernaut is unstoppable.”
Headwinds are also expected, at least at the start of 2025, with UBS head of Chinese automotive research Paul Gong warning of uncertainty surrounding China’s broader economic policy. Still, he expects a “strong surge in purchases” at the end of the year, due to the expiration of subsidies and the impending introduction of a 5% purchase tax on EVs in 2026.
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