The structural collapse of gas car sales has continued in the world’s largest auto market, with July numbers showing that the only type of vehicle doing well is pure battery-electric cars, while sales of every other type of vehicle continue to drop precipitously for months on end.
Sales numbers for July in China show a modest 6% year-over-year increase in battery electric vehicle (BEV) sales, and a massive 44% drop in gas car sales, causing an overall drop in the Chinese auto market which BEVs seem to be the only vehicle weathering.
While Chinese EV sales hit their inflection point and have been rising quite rapidly since 2020, this most recent trend has also included a collapse of every type of vehicle that includes a combustion engine in it.
This collapse has been reported on as a “shrinking Chinese auto market,” and some have even claimed that EV sales are down in China, but that’s not really true – it’s combustion engine sales that are down, not EV sales.
This quirk of the numbers is due to the unique way that China defines an EV – it designates all plug-ins as “NEVs,” new energy vehicles, including full BEV cars, plug-in hybrids (PHEVs), and extended-range electric vehicles (EREVs, large-battery PHEVs where the ICE engine is mechanically disconnected from the wheels), but not including conventional hybrids which cannot plug in and get all their energy from gasoline.
So, NEV sales are indeed down, but that’s because PHEV sales are dragging down the average, while BEV sales are up.
The actual numbers look thusly, for July 2026, comparing to July of 2026:
- Overall car sales: down 3.9%
- BEVs: up 6%
- PHEVs: down 21.1%
- EREVs: down 16.5%
- NEVs (BEV + PHEV + EREV): down 3.9%
- Conventional hybrids: down 4%
- Pure ICE vehicles: down 44%
Cumulatively for the year, overall Chinese car sales are down 12.5% in the first 7 months of 2026.
So the pattern is: anything with a gas engine is down, while the one powertrain that doesn’t have an engine in it is up.
Despite NEVs as a whole being down, everything else was down more, which meant a record 65.1% retail market share in China.
At the beginning of this year, there was much reporting about Chinese BEV sales being down. This was true in the first few months of 2026, primarily due to China changing its electric vehicle incentive program at the end of 2025, causing a dip in demand.
But demand changed directions in March. Can anyone think of a reason why?
While China has withstood well the global spike in oil prices due to the idiotic war in Iran (started by a man who cannot legally hold US office), via its high strategic petroleum reserve (thanks to plateuing Chinese oil demand due to high EV penetration) and consumer price caps on gasoline, the country does seem to be getting the message that relying on an insecure commodity is a bad idea.
That message hasn’t just gotten out to China, it’s gotten out to the rest of the world, too. EV sales are booming globally, and Chinese manufacturers are happy to supply the vehicles that the rest of the world wants. As a result, Chinese NEV exports rose by 147.8% year-over-year in July. NEVs accounted for 58.8% of total Chinese vehicle exports.
China became the world’s top auto exporter in 2024 after decades of dominance from Japan and Germany, and shows little sign of relinquishing that title as the world gets more hungry for EVs, and international auto manufacturers seem uninterested in supplying them.
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