Sales of Chinese cars likely to fall in 2025

Experts at the China Passenger Car Association (CPCA) expect Chinese car exports to decline in 2025. Reuters reports. In the previous two years (2023 and 2024), vehicle exports from the country topped the rankings. The decline is due to lower demand, as well as the introduction of tariffs in Europe.

Despite the additional tariffs on Chinese electric cars imposed by the European Union in October 2024, the Asian giant managed to retain its top spot in car exports, with the country exporting 25% more cars than in the previous year. China therefore most likely took first place in 2024, overtaking Japan. The Land of the Rising Sun failed to maintain stable figures, and its exports fell by 4.3% in the first 11 months of 2024, according to the Japan Automobile Manufacturers Association.

However, high export figures will face numerous obstacles this year, which will also bring the total volume down by around 10% compared with 2024. Cui Dongshu, CPCA secretary-general, said the association expects deliveries to Russia to fall, while the increased pressure from European tariffs will also take full effect. As for electric car exports, the secretary-general expects zero growth. Last year, exports of electric cars and plug-in hybrids rose by 24.3%. The EU's investigation into state subsidies for Chinese electric cars affected exports, with growth of 10% in the first months of 2024 significantly lagging behind the 36% increase in 2023, according to the association.

Russia, Mexico and the United Arab Emirates were the largest buyers of cars made in China in the first 11 months of 2024. Exports to Thailand, Australia and Britain fell last year.

Charles Lester, a research analyst at Rho Motion, believes the EU tariffs will have only a short-term effect on sales of Chinese electric cars. By building their own production plants in Europe (for example, BYD in Hungary), Chinese automakers will gradually secure a share of the European market over the long term.

Chinese automakers celebrate as others fall behind

China's car market, the world's largest, managed to maintain its planned growth rate in 2024, helped by record sales of electric cars and plug-in hybrids, as well as subsidised trade-ins for greener vehicles.

Exceptional growth in China against a largely stagnant global electric vehicle market is good news for local leaders such as BYD, Geely and Xiaomi. US company Tesla has also benefited, achieving record-high sales in China in 2024 and offsetting losses caused by an overall decline in global sales.

Other carmakers, including US-based General Motors, Japan's Toyota and Germany's Volkswagen, are unable to keep pace with their Chinese counterparts and are struggling to make efficient use of capacity at their plants in China.

Car sales are growing

According to CPCA data, passenger car sales rose by 5.3% in 2024 to 23.1 million units, marking a fourth consecutive year of growth and matching the pace of 2023.

Sales of electric cars and plug-in hybrids rose by 40.7%, accounting for 47.2% of total car sales last year. More than 6.6 million cars sold last year benefited from government subsidies of up to USD 2,800 for the purchase of a low-emission vehicle and up to USD 2,000 for more fuel-efficient cars with internal combustion engines, with more than 60% of subsidised purchases going to low-emission vehicles.

China recently announced that it would extend subsidies for the purchase of new low-emission vehicles through 2025 as part of an expanded consumer trade-in scheme aimed at reviving economic growth.

CPCA estimates that total car sales will rise by 2% this year, while sales of low-emission vehicles will grow by 20% and account for 57% of total car sales in China, the CPCA forecast.

This suggests that growth in sales of electric cars and plug-in hybrids in 2025 could be the weakest since 2021, despite the scale of government subsidies reaching its highest level.

Sales are growing, but revenue is falling

Although sales are rising, China's car industry is grappling with declining profitability. Sales profit margins stood at 4.4% in the first 11 months of 2024. By comparison, according to the association, they were 5% in 2023 and as high as 6.2% in 2020. Suppliers and dealers have also felt the impact of a widespread price war, which has forced them to cut component prices further or offer bigger discounts on cars.