Electric vehicles (EVs) are expected to outsell traditional internal combustion engine (ICE) vehicles in China for the first time next year, marking a historic turning point for the world’s largest car market. This shift is anticipated to occur well ahead of Western counterparts, signaling China’s dominance in the global electric vehicle industry.
According to the latest estimates shared with the Financial Times by four investment banks and research groups, EV sales in China—encompassing both pure battery-electric vehicles and plug-in hybrids—are forecast to rise by approximately 20% in 2025, reaching over 12 million units. This would more than double the 5.9 million EVs sold in 2022. In contrast, sales of traditional vehicles are predicted to decline by more than 10%, dipping below 11 million in 2025, a near 30% drop from the 14.8 million sold in 2022.
This dramatic surge in EV sales is a direct reflection of China’s rapid advancements in domestic technology and its ability to secure global supply chains for critical resources like lithium and cobalt, which are essential for EVs and their batteries. The scale of China’s manufacturing capabilities has also driven down production costs, making EVs more affordable for consumers, according to Robert Liew, director of Asia-Pacific renewables research at Wood Mackenzie.
“No other country comes close to China,” Liew stated, highlighting the country’s determination to electrify every sector of its economy. The country’s aggressive push towards EV adoption is expected to see its official target of having EVs account for 50% of total car sales by 2035 achieved a decade ahead of schedule.
While China’s EV growth has eased from the post-pandemic surge, the industry remains on track to exceed expectations. Estimates from investment banks such as UBS and HSBC, along with research groups like Morningstar and Wood Mackenzie, forecast China’s electric vehicle market to continue expanding at a strong pace in the coming years.
The shift away from traditional vehicles is a troubling sign for foreign automakers. As of 2024, the market share of foreign-branded cars in China fell to a record low of 37%, down from 64% in 2020, according to Automobility, a Shanghai-based consultancy. This decline signals a rapid shift in consumer preference towards homegrown Chinese brands, which are increasingly dominating the EV sector. At the same time, legacy carmakers in Europe and the U.S. face slowing sales growth as they struggle to adapt to new technologies and shifting market dynamics.
Notably, multinational companies such as General Motors, Volkswagen, Nissan, and Honda are already feeling the pressure. GM recently wrote down over $5 billion in its Chinese business value, while Volkswagen warned of potential writedowns of up to €20 billion in its stake. The changing business environment has even led to a merger announcement between Nissan and Honda as they adjust to the rapidly evolving landscape.
China’s EV market growth is not without challenges. Internally, the industry faces intense competition, oversupply of models, and price wars as domestic manufacturers jockey for position. According to Yuqian Ding, a veteran Beijing-based analyst at HSBC, while the domestic EV sector is thriving, it is also starting to experience slowing growth from a high base. “The longer-term direction of travel is clear—China’s EV juggernaut is unstoppable,” Ding said.
Vincent Sun, an equity analyst at Morningstar, pointed out that several major foreign carmakers, including Volkswagen, are not expected to release significant new EV models in China until 2025 or 2026. Meanwhile, domestic manufacturers are preparing to release a flurry of new electric vehicle models. According to HSBC, around 90 new car models—nearly all of them EVs—are scheduled for release in the fourth quarter of 2024, equating to roughly one new model per day.
Despite this robust pipeline, Paul Gong, head of Chinese automotive research at UBS, cautioned that some uncertainty remains over China’s broader economic policy heading into 2025. However, he predicted a surge in EV purchases toward the end of 2025, as government subsidies for electric vehicles are set to expire and a 5% purchase tax on EVs is set to be introduced in 2026.
China’s rapid rise in the EV sector not only reflects its technological and economic advancements but also signals the potential for a shift in global automotive power. As the country continues to innovate and scale its electric vehicle production, traditional automotive giants will need to adapt quickly or risk falling behind in a market that is increasingly defined by electric mobility.
