Gasgoo Munich- Retail sales of passenger vehicles nationwide hit 1.602 million units in June, down 23.2% from a year ago but up 6.1% from May, according to the latest data from the China Passenger Car Association (CPCA). Secretary-General Cui Dongshu noted that the market’s decline in June outpaced the average for the first half of the year, creating more downward pressure than in the previous two months. "We are in a relatively tough trough," he said.
Image source: CPCA
Even more telling is the structural fracture accelerating beneath the surface. Retail sales of internal combustion engine (ICE) vehicles slumped 39% year-on-year, with pure ICE models diving 42%. Meanwhile, the retail penetration rate of new energy vehicles (NEVs) climbed to 62.8% — a 9.5 percentage-point jump from last year. At first glance, this looks like a simple split between fuel and electric, but a closer look reveals the divergence runs much deeper.
Domestic Brands Grab 68.6% Share; JVs Show Signs of a Turn
Domestic brands continue to dominate the market. In June, they moved 1.10 million units at retail, capturing a 68.6% share of the domestic market — up 4.5 percentage points from a year ago. Data from the CPCA shows that top players like BYD, Geely, and Chery delivered steady performances, while the effects of strategic transformation at some traditional automakers are finally starting to show, driving significant gains in market share.
Yet, domestic brands aren’t resting easy. Retail data shows sales for these brands slipped 18% year-on-year, with domestic retail sales of their new energy segment falling 11%.
The CPCA attributes this largely to a slump in economy electric vehicles. A hangover from subsidy rollbacks and weak purchasing power among low-end consumers has caused the A00- and A0-segment EV markets to cool significantly.
Data shows wholesale sales of A00-class pure electrics plunged 50% year-on-year in June to 77,000 units. They now account for just 8% of the pure EV market, down 11.9 percentage points from last year. For domestic brands that once dominated the market with mini EVs, the entry-level segment is becoming a severe test of survival.
The CPCA points out that the sharp decline in low-end economy cars, combined with waning appetite for entry-level models in rural and lower-tier markets, has become a bottleneck constraining market expansion. True popularization of entry-level EVs is needed to drive sustainable growth, and the current outlook offers little optimism.
The joint venture camp faces an even tougher struggle. Retail sales for mainstream joint venture brands fell 34% year-on-year in June to 330,000 units. German brands saw their retail share drop to 12.8%, down 3.4 percentage points, while Japanese brands slipped to 11.0%, a decline of 1 percentage point.
ICE vehicles are the foundation of joint venture brands, but that foundation is crumbling. Retail sales of conventional fuel cars dropped 39% year-on-year in June to 600,000 units. Squeezed by high fuel prices and a rapid consumer shift to new energy, the decades-old dominance joint ventures once held in the fuel sector is eroding fast.
Yet, the data holds one easily overlooked signal. Retail sales of new energy vehicles from mainstream joint venture brands jumped 45% year-on-year in June, even as domestic brands saw an 11% decline. While the absolute volume for joint venture EVs remains small — accounting for just 4.3% of domestic retail sales — that growth rate is worth watching.
Behind this shift is a move by joint venture giants, having weathered the initial pain, to finally direct serious resources toward electrification. Volkswagen, Toyota, and General Motors are seeing their efforts in pure electric and plug-in hybrid segments gain traction. The competition between domestic and joint venture brands on the EV track is likely to become even fiercer than in the past two years.
The luxury market is also under strain. Retail sales fell 30% year-on-year in June to 170,000 units. However, as sticker prices return to more reasonable levels, luxury brands held a 10.3% retail share in June, down just 1.1 percentage points. The CPCA notes that some ultra-luxury brands experienced unusual volatility, indicating significant operational pressure across the industry.
NEV Penetration at 62.8%; Polarization Between High-End and Low-End
Retail sales of new energy passenger vehicles reached 1.007 million units in June, down 9.4% year-on-year but up 6% from May, according to the CPCA. While total volume dipped, the penetration rate remained high at 62.8% — a 9.5 percentage-point increase from last year. This means the market share for fuel vehicles has been squeezed to just 37.2%, solidifying the reversal where electric outsells gasoline.
Image source: CPCA
On the wholesale side, NEV passenger car sales hit 1.481 million units in June, a 19.2% year-on-year increase and a 9.6% rise month-on-month. Pure electric vehicles accounted for 981,000 units, up 26.9%; plug-in hybrids reached 406,000, up 18.1%; while extended-range electric vehicles (EREVs) totaled 94,000, down 25.2%.
Cui Dongshu pointed out that the NEV market this year is showing an "absolute divergence," with plug-in hybrids and extended-range vehicles performing far worse than pure electrics. Although the shift from a fixed 20,000 yuan scrappage subsidy to one based on vehicle price dealt a heavy blow to A00-class EVs, pure electrics still managed 4% year-on-year growth in June. In contrast, EREVs fell 16.4% in the first half and 32% in June alone. "The trend for extended-range is weak, while pure electric is extremely strong," Cui said.
Another distinct feature is the polarization between a "surge in high-end EVs" and "pressure on low-end economy models."
The high-end market is performing strongly. Wholesale sales of B-class pure EVs jumped 37% year-on-year in June to 295,000 units, claiming a 30% share of the pure EV market — up 2 percentage points from last year. Data shows domestic brands hold a retail share exceeding 50% in high-end price brackets: 200,000 to 300,000 yuan, 300,000 to 400,000 yuan, and above 400,000 yuan. Models like the Li Auto L6, Xiaomi SU7, NIO, and ZEEKR have remained relatively stable in their segments, suggesting that demand for high-end NEVs has not been significantly dented by the broader market slump.
The low-end market tells a different story. Sales of A00-class pure EVs have fallen off a cliff, and the A0 segment is under significant pressure as well. The CPCA notes that economy EVs in the A00 and A0 classes face broad headwinds, and entry-level consumption urgently needs policy support. A negative wealth effect from the recent housing slump and structural market stagnation, combined with bleak expectations for income and employment, has dampened spending power. With growth in essentials like food and clothing far outpacing that of housing and transport, the willingness to purchase A0- and A-class vehicles has clearly weakened.
At the manufacturer level, market concentration continues to intensify. Twenty automakers exceeded wholesale sales of 10,000 NEVs in June, accounting for 93.6% of the total. BYD Auto led with 397,000 units, followed by Geely Auto at 159,000, Chery Auto at 107,000, Leapmotor at 93,000, and Tesla China at 89,000. New forces captured a 26.0% retail share, an increase of 6.5 percentage points year-on-year, driven significantly by brands like Leapmotor and NIO.
Cui Dongshu believes the trend toward pure electrics is strengthening. "The shift away from fuel is clear, and pure EVs are the ultimate direction of development," he said. As flash charging, fast charging, and battery safety technologies improve rapidly, "consumer acceptance of electric vehicles is bound to rise."
On the export front, new energy vehicles remain the strongest growth engine. NEV passenger car exports reached 499,000 units in June, a 152.7% year-on-year surge, accounting for 56.9% of total passenger vehicle exports — up 15.9 percentage points from last year.
Image source: CPCA
Cui noted that June exports were far above the average for the first half of the year, "hitting a new high and achieving exceptional growth of 80%." He believes improved conditions in the Gulf have benefited shipping, and a recovery in the Middle East market — which had previously plummeted — helped drive further export growth in June.
BYD led the first tier of exporters with 171,000 units in a single month, followed by Chery at 74,000, Geely at 62,000, and Tesla China at 36,000. Recognition of Chinese NEVs in overseas markets continues to rise. Despite policy interference from some countries, the momentum for domestic plug-in hybrid exports to developing nations remains rapid, with a positive outlook.
July Headwinds Ease, Market Poised for Gradual Recovery
The first half of the auto market concluded with "total volume under pressure and structural divergence," putting the spotlight on July's trajectory.
On the production side, July offers 23 working days, allowing relatively ample time for manufacturing and sales. On the demand side, the core factors that suppressed the market in June are shifting.
Image source: IM Motors
First, oil prices. International crude briefly spiked to $126 per barrel, pushing domestic gasoline prices from 7,670 yuan per ton at the start of the year to a peak of 10,325 yuan in April — a severe drag on ICE vehicle consumption. On July 3, domestic refined fuel prices saw their steepest drop in six years, falling 950 yuan per ton to 8,175 yuan. While June still felt the inertia of high prices, the boost to auto consumption from falling oil prices is expected to materialize in July.
Second, external disruptions are fading. A mismatch with the Dragon Boat Festival created a high base effect in June, while the "618" shopping festival underperformed. The start of the World Cup siphoned off time and budget from car buyers, and the college entrance exams combined with the busy farming season reduced dealership foot traffic. Add in high temperatures and heavy rains, and multiple factors converged to squeeze the market. "The World Cup caused some interference; car buyers are also World Cup fans, and night matches affected daytime showroom visits," Cui analyzed.
Meanwhile, favorable policies like July's new battery regulations led some consumers to take a wait-and-see approach, hoping to buy later. Additionally, falling oil prices improved sentiment among ICE vehicle owners. June ICE sales rose 6.3% month-on-month, slightly outpacing the 6% growth for NEVs. "ICE vehicles saw a marginal improvement first, while NEVs faced interference, slowing their recovery."
The CPCA points out that as the World Cup concludes and the rainy season recedes in July, suppressed demand is likely to be released gradually in the third quarter.
Regarding the second half, Cui said the market will improve significantly after July. "We are not pessimistic about the second half; the market will get better." However, for July specifically, the retail sector is likely to see a weak recovery, while the wholesale sector will continue to run high due to strong exports and aggressive manufacturer shipment targets. The gap between wholesale and retail growth rates may widen further.
On the policy front, July brings two key milestones. First, new national safety standards for NEVs take effect, imposing mandatory requirements for crash safety and battery "thermal runaway non-ignition." This raises the technology barrier significantly, lengthening development cycles and costs for mainstream products and putting pressure on lower-end models to update. Second, an adjustment to vehicle and vessel tax was announced in early July, clarifying that hybrids will no longer enjoy tax exemptions starting in 2027. This sends a clear signal of "parity between fuel and electric," further highlighting the policy advantage of pure EVs.
The CPCA expects NEV penetration rates to remain high in July, though growth may slow. Structurally, the share of pure electric vehicles is likely to see a modest rebound.
Profitability remains a major pressure point. Data from the CPCA shows that from January through May of 2026, the auto industry generated revenue of 4.2096 trillion yuan, up 1.4% year-on-year, while costs rose 2.3% to 3.7397 trillion yuan. Profit fell 20% to 144 billion yuan, resulting in an industry profit margin of just 3.4% — far below the 6.1% average for downstream industrial sectors. With upstream raw material inflation squeezing margins and terminal price wars eroding profitability, the squeeze on automakers is unlikely to ease fundamentally in the short term.
Yet, there are positive signals. The CPCA suggests that as the new safety regulations and tax reform expectations are digested, chip shortages ease at the margin, and consumer confidence slowly recovers, the decline in retail sales is expected to narrow gradually in the third and fourth quarters.
The NEV industry has moved from a policy incubation phase to a market-driven maturity. Future core competitiveness for automakers will lie in technological safety, global layout, and user value creation. "Price-driven" strategies will give way to "value-driven" ones, and the focus of competition is shifting rapidly toward intelligence, safety, and real-world range performance.
The July market will be a key window for observing second-half trends. Sequential improvement is expected, but the internal polarization within the NEV sector — between high-end and low-end, and between pure electric and plug-in hybrid — will not easily reverse. For automakers, the dual challenge for the second half will be clear: secure profits in the high-end market through technology and branding, and defend market share in the low-end segment through cost control and scale.
