China's EV Sales to Surpass Gasoline Cars in 2024: A Turning Point for an Era

China's EV Sales to Surpass Gasoline Cars in 2024: A Turning Point for an Era2024 will mark a historic turning point for China's electric vehicle (EV) market. EV sales are projected to exceed those of gasoline-powered vehicles for the first time, signifying the world's largest automotive market's lead over Western nations in the electrification process by several years

China's EV Sales to Surpass Gasoline Cars in 2024: A Turning Point for an Era

2024 will mark a historic turning point for China's electric vehicle (EV) market. EV sales are projected to exceed those of gasoline-powered vehicles for the first time, signifying the world's largest automotive market's lead over Western nations in the electrification process by several years. Multiple authoritative institutions predict that next year, China's EV sales (including battery electric vehicles and plug-in hybrids) will surpass 12 million units, representing a year-on-year growth of approximately 20%. This significantly exceeds previous international predictions and official targets, more than doubling the 2022 sales figures. This dramatic increase stands in stark contrast to the shrinking gasoline car market, expected to decline by over 10%, falling to less than 11 million units a reduction of nearly 30% compared to the 14.8 million units sold in 2022.

This diverging market performance reflects the different development trajectories of China's EV market compared to those in Europe and the US. Slower growth in European and US EV sales is attributed to a combination of factors: slower adoption of new technologies by traditional automakers, uncertainty surrounding government subsidy policies, and rising protectionism against Chinese imports.

Robert Liew, Wood Mackenzie's Head of Asia Pacific Renewables Research, points to China's strategic focus on domestic technology development and securing global supply chains for EVs and key battery resources as key to its success. Economies of scale have significantly lowered manufacturing costs, enabling consumers to purchase EVs at more affordable prices. "Their aim is full-scale electrification," emphasizes Liew. "No country comes close to China."

Despite a slowdown in EV sales growth from its post-pandemic peak, projections suggest that the Chinese government's target of EVs accounting for 50% of vehicle sales by 2035 could be achieved a decade ahead of schedule. UBS, HSBC, Morningstar, and Wood Mackenzie, among other institutions, support this prediction, noting that many Chinese gasoline car factories may lose almost all their domestic market within the next ten years.

The rapid rise of China's EV market presents a significant challenge to automotive giants in Germany, Japan, and the US. Data suggests that the Chinese EV market is expected to achieve nearly 40% year-on-year growth in 2024, while the market share of foreign brands will plummet to a record low of 37%, significantly down from 64% in 2020. This drastic decline in market share has led some multinational automakers to face massive asset write-downs. For example, General Motors has written down over $5 billion in the value of its China operations; Porsche's parent company warned of potential write-downs of up to 20 billion on its Volkswagen holdings; and Nissan and Honda announced mergers to cope with the "dramatically changing business environment."

While facing intense internal competition, domestic Chinese automakers are showing strong momentum. Ding Yuqian, a senior analyst at HSBC in Beijing, notes that EVs have become a crucial component of China's burgeoning high-tech economy, but the trend of industry consolidation will force more players out of the market. "Despite the booming development of China's electric vehicle industry, it also faces challenges such as slowing growth, model surplus, intensified competition, and price wars. However, in the long run, the growth momentum of China's electric vehicles is unstoppable," says Ding.

Tu Le, founder of SinoAutoInsights, believes the automotive industry is at the "beginning" of an unprecedented transformation. This view is echoed by Sun Fei, a Morningstar equity analyst covering the Chinese auto industry. Sun points out that several multinational automakers, including Volkswagen of Germany, are not expected to launch new EV models in China until the end of 2025 or 2026. In contrast, HSBC projects that Chinese automakers plan to release approximately 90 new models in the fourth quarter of 2024 alone an average of one per day with nearly 90% being EVs.

However, future market development won't be without hurdles. Gong Min, Head of China Automotive Research at UBS Investment Bank, cautions that the car market is expected to experience "weakness at the beginning of the year" after a strong finish in 2024, heading into 2025. He also notes that the expiry of subsidies and the introduction of a 5% purchase tax on EVs starting in 2026 are expected to trigger a surge in purchases towards the end of 2025.

In conclusion, the surpassing of gasoline car sales by EVs in China's market in 2024 will be a milestone not only for the Chinese auto industry but also a harbinger of profound changes in the global automotive landscape. China's leading position in the EV sector will have a far-reaching impact on the future development of the global automotive industry. This rapid development is not without its challenges; the intensifying market competition, the impact of policy changes, and the potential for growth slowdown all require close monitoring. However, the vast potential and continued growth momentum of China's EV market in the long term are undeniable.