Fuel Price Cuts Fail to Halt Steady Decline of Gasoline Vehicle Market

Starting at 24:00 on June 4, domestic gasoline and diesel prices were reduced by RMB 525 and RMB 505 per ton, respectively. Nationally, the average retail prices of Grade 92 and Grade 95 gasoline dropped by RMB 0.41 and RMB 0.44 per liter, respectively. Filling a 50-liter tank of Grade 92 gasoline now saves RMB 20.50, lowering operating costs for fuel-powered vehicles. However, sales of internal combustion engine (ICE) vehicles have continued to decline this year. In May, nationwide passenger vehicle retail sales fell 20% year-on-year, with new energy vehicle (NEV) retail sales down 5% year-on-year. NEVs accounted for 63% of the market, pushing ICE vehicle market share down to 37%, with sales totaling 571,000 units. The used car market is also under pressure, drawing attention to reports of a "collapse in used ICE vehicle prices." Some previously RMB 300,000 ICE used cars are now selling for only RMB 200,000, with certain models losing up to RMB 30,000 in value within a single month, triggering panic selling among owners. According to a report from the China Automobile Dealers Association, residual values across all vehicle segments declined in May, and steep discounts on new ICE vehicles further exacerbated the downturn in the used car market. Among traditional premium brands, Tesla and Lexus posted three-year residual values of 56.5% and 56.3%, respectively. On the new vehicle supply front, as of May 30, 107 new models had been launched this year, of which only 10 were pure ICE vehicles—mostly luxury or imported models priced above RMB 300,000. Affordable joint-venture and domestic-brand ICE models were virtually absent from new launches. Major joint-venture automakers are also pivoting toward NEVs; for example, SAIC Volkswagen’s new models this year are almost entirely NEVs. Meanwhile, debate is intensifying over whether NEVs should pay road maintenance fees. Since the 2009 "fee-to-tax" reform, road maintenance fees have been incorporated into the refined oil consumption tax, which pure electric vehicles do not pay. With NEV penetration exceeding 60%, ICE vehicles now shoulder a relatively heavier tax burden. Considering these multiple factors, the recovery of the ICE vehicle market faces significant challenges.