[SMM Analysis] New Energy Penetration Rate Breaks 50% for the First Time: A "Watershed" Moment for July Auto Market

NEV Penetration Rate Surpasses 50% for First Time in July, Exports Continue High Growth

In July, China's auto sales were about 2.584 million units, down 8% MoM and down 0.3% YoY. Of this total, NEV sales were 1.561 million units, down 5% MoM and up 23.7% YoY. Notably, this was the first time that China's NEV sales penetration rate (without distinguishing between passenger and commercial vehicles or between exports and domestic sales) exceeded 50% — meaning that one of every two vehicles sold in the market was an NEV — marking the formal transition of NEVs from a policy-driven "supplementary choice" to a market-driven "mainstream choice" and a structural turning point of milestone significance in the energy transition of China's automotive industry.

Broken down by domestic sales and exports:

Domestic Sales: Clear Seasonal Pullback, Accelerating Contraction of Traditional Fuel Vehicles

In July, domestic auto sales were 1.541 million units, down 13.1% MoM and down 23.6% YoY. Of this total, domestic sales of traditional fuel vehicles were 533,000 units, down 18.4% MoM and down 45.7% YoY; the decline widened further, reflecting that NEV models are replacing the share of traditional fuel vehicles in the Chinese market at an accelerating pace. Domestic NEV sales were 1.008 million units, down 10% MoM and down 2.8% YoY, with a penetration rate of about 65%. By segment, domestic passenger NEV sales were 916,000 units, down 9% MoM and down 6.1% YoY; domestic commercial NEV sales were 92,000 units, down 18.8% MoM and up 48.8% YoY, continuing the rapid growth trend. In July, domestic sales showed a clear seasonal pullback, mainly due to two factors: first, automakers' concentrated sales pushes around the previous half-year period had released some demand in advance; second, extreme weather nationwide, such as high temperatures and typhoons, curbed offline sales activities.

Exports: High Growth Continues, PHEV Growth Leads

In July, auto exports were 1.043 million units, up 0.6% MoM and up 81.3% YoY. Of this total, NEV exports were 553,000 units, up 5.7% MoM and up by 1.5 times YoY; the export penetration rate reached 53% and has exceeded 50% for two consecutive months. By technology route, battery electric vehicle exports were 331,000 units, accounting for about 60% and up by 1.4 times YoY; plug-in hybrid vehicle exports were 222,000 units, up by 1.6 times YoY. In terms of annual growth, plug-in hybrid vehicles performed more prominently and are expected to continue expanding their share in the export market.

Market Outlook: Domestic Sales Under Pressure, Exports Promising

Looking ahead, domestic NEV sales still face certain pressure. Although H2 will enter the traditional sales peak season, against the current backdrop of no new policy incentives, overall growth room is expected to be limited, and full-year domestic sales are still expected to decline by more than 10% YoY. Export side, automakers generally view exports as a core source of future growth; the export market is expected to continue expanding (currently, NEV exports account for about 35%), becoming the main driver of growth for China's NEV industry.