China's car sales maintained their growth pace in 2024 as sales of electric vehicles and plug-in hybrids in the world's largest auto market hit a record high amid a brutal price war and with subsidised trade-ins for greener vehicles driving purchases.
The outstanding growth in China in a largely stalling global EV landscape spelled good fortune for local winners such as BYD (002594.SZ), , Geely (GEELY.UL) and Xiaomi (1810.HK) and expedited an industry shakeout in a competitive market.
It also benefited Tesla (TSLA.O), whose China sales hit a record high in 2024, bucking an overall decline in the U.S. EV giant's global sales.
Other foreign automakers such as General Motors (GM.N), Toyota (7203.T) and Volkswagen (VOWG_p.DE) continued to lose ground to local rivals, however, with many of them struggling to sustain effective capacity usage at their Chinese plants.
Passenger vehicle sales were up 5.3% to 23.1 million units in 2024 for the fourth straight year of growth, in line with the 2023 pace, according to the China Passenger Car Association (CPCA).
Sales of EVs and plug-in hybrids, known collectively as new energy vehicles (NEVs), rose 40.7% to make up 47.2% of total car sales last year, closing in on a 50% milestone, buoyed by a programme likened to the U.S. "cash-for-clunkers" stimulus in 2009.
More than 6.6 million cars sold last year benefited from government subsidies of up to $2,800 for NEV purchases versus as much as $2,000 for more fuel-efficient combustion engine vehicles. Over 60% of the subsidised purchases went to NEVs, per official data.
The authorities announced on Wednesday an extension of the auto trade-in subsidies into 2025 as part of an expanded consumer trade-in scheme to revive economic growth.
"We expect the vehicle trade-in subsidy programme to boost full-year 2025 demand by 3.0 million units," said Deutsche Bank analyst Bin Wang.
Despite the sales growth, China's auto industry has seen a deteriorating profitability over the years, with sales profit margins falling to 4.4% in the first 11 months of 2024 from 6.2% in 2020, according to the CPCA.
Suppliers and dealers also suffered from an extended price war that forced them to cut component prices more or offer deeper discounts.
