China EV sales dip 5% in July as discounts narrow

EV sales in China dropped 5% month-on-month to 1.3 million units in July, marking the first drop since May, according to the China Association of Automobile Manufacturers.

Sales were still up 27.4% year-on-year.

The drop followed narrower discounts by carmakers after Chinese authorities urged the industry to prioritize profitability over aggressive price cuts.

The average price reduction on both electric and petrol cars fell to 16.7% in July from 17.4% in June, a JP Morgan report said.

In the first seven months of 2025, EV sales in China rose 38.5% year-on-year to 8.2 million units, with EVs accounting for 48.7% of total car sales.

Budget electric cars, especially those priced below 100,000 yuan ((US$13,913) and offering basic self-driving features, continued to attract buyers seeking value for money.

China’s EV sales tax exemption ends in December 2025, with a 5% tax set to begin in 2026 and rise to 10% in 2028.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s EV industry faces a massive consolidation despite global dominance

The July sales dip reflects deeper structural challenges in China’s overcrowded EV market, where brutal competition has created unsustainable economics for most players.

Over 200 manufacturers are currently competing in China’s EV space, but industry analysts expect only five major players to survive by 2030 1. This prediction aligns with current market realities. Only three of China’s approximately 50 EV manufacturers are profitable: BYD, Li Auto, and Aito.

The intensity of competition has already driven average profit margins across China’s auto industry to just 5% in 2023, the lowest level in a decade 1.

This consolidation pattern explains why Beijing intervened to curb the price war despite China’s global EV leadership position. The country produces nearly two-thirds of the world’s EVs and controls 85% of global battery mineral refinement 2.

The government’s intervention reflects a critical balancing act between maintaining China’s export competitiveness and ensuring domestic industry survival.