• China EV sales projected to reach 12 million units in 2025, overtaking conventional vehicle sales.
• Government incentives and fierce domestic competition drive EV adoption.

Sales of Chinese electric vehicles are on track to achieve a milestone in 2025, with EVs expected to outsell traditional combustion engine cars in the country for the first time. The watershed puts the world’s most significant automotive market years ahead of Western counterparts in the transition to clean energy vehicles.

According to the latest estimates shared with the Financial Times by investment banks and research groups including UBS and HSBC, domestic EV sales in China are projected to grow approximately 20% year-on-year, to exceed 12 million vehicles in 2025. The remarkable growth includes pure battery electric vehicles and plug-in hybrids, and demonstrates China’s shift toward sustainable transport.

The contrast with traditional vehicle sales is striking. Sales of internal combustion engine vehicles are forecast to decline by more than 10% to under 11 million units in 2025 in China, reflecting a dramatic 30% drop from the 14.8 million units sold in 2022. The crossover to electric dominance represents a significant change to automotive preferences in the world’s most populous nation.

Market leader BYD exemplifies this shifting landscape. In 2024, it delivered nearly 4.3 million electric vehicles to become China’s largest automaker, surpassing previous market-leader SAIC. BYD’s success is built on a strategy of offering electric and hybrid vehicles at competitive prices, supported by aggressive expansion of its model lineup.

Central government policies have played a important role in accelerating EV adoption in China. Trade-in programmes offer subsidies exceeding $2,800 for consumers replacing conventional vehicles with electric or hybrid models, which has influenced many purchase decisions. And, major cities like Beijing have implemented policies that make obtaining licence plates for new energy vehicles easier than for traditional cars.

Chinese manufacturers have achieved significant cost efficiencies through scale and technological advancement, making EVs increasingly accessible to mass-market consumers. The automotive environment has fostered new players, including technology companies like Xiaomi, which delivered over 130,000 units of its first EV model in 2024.

The rapid growth in China’s EV market starkly contrasts developments in Western markets. While China pushes ahead with aggressive adoption targets, EV sales growth has slowed in Europe and the US, hampered by high interest rates, inflation concerns, and inconsistent government support. 

This divergence highlights the effectiveness of China’s coordinated approach to EV adoption, combining policy support with market-driven competition. On the other hand, the impact on traditional foreign automakers has been substantial. China’s market share of foreign-branded cars fell to 37% in 2024, down from 64% in 2020. 

This decline has prompted significant write-downs by major international manufacturers, with General Motors recording a $5 billion reduction in its China business value and Volkswagen facing potential write-downs of up to €20 billion through its Porsche holding company.

Looking ahead, China appears set to achieve its official target of EVs, accounting for 50% of car sales a decade ahead of the original 2035 schedule. This accelerated transition is supported by a maturing ecosystem of manufacturers, suppliers, and charging infrastructure providers. The China Passenger Car Association reports that new energy vehicles, including battery electrics and plug-in hybrids, achieved a market penetration rate of 52.3% by November 2024, compared to 36% in July 2023.

Robert Liew, director of Asia-Pacific renewables research at Wood Mackenzie, attributes China’s success to its domestic technology development and supply chain management achievements. The country has established robust supply chains for critical EV components and batteries while achieving manufacturing efficiencies that enable competitive pricing.

As China’s EV market continues to evolve, the increasing dominance of electric vehicles could establish new paradigms for global automotive industry development. The country’s experience demonstrates how coordinated policy support, market competition, and technological innovation can accelerate the transition to sustainable transportation, potentially offering valuable lessons for other markets pursuing similar transformations.