Fuel-Powered Vehicle Sales Drop Over 30% for Two Straight Months; Price Cuts Fail to Halt Market Share Slump Below 40%

In April and May 2024, domestic retail sales of fuel-powered vehicles declined by 37% and 39% year-on-year, respectively, pushing their market share below 40%. Both domestic brands, joint-venture brands, and luxury brands have all been significantly impacted. In an effort to boost sales, automakers and dealerships slashed new vehicle prices by an average of over RMB 30,000 in the first five months—but sales failed to recover, instead falling into a vicious cycle where “the more prices drop, the harder it becomes to sell.” Multiple factors have intensified market pressures: dealer inventories have piled up severely, with the inventory coefficient in May far exceeding the warning threshold. Additionally, the nationwide implementation of the China VI-B emissions standard in July has forced automakers to urgently clear over one million China VI-A compliant vehicles from stock, compelling some dealerships to sell at a loss. Meanwhile, new energy vehicles (NEVs) now account for more than 60% of the market, continuously squeezing the space available for fuel-powered cars. Persistently declining residual values of internal combustion engine (ICE) vehicles, combined with price volatility, have further heightened consumer hesitation. The market downturn has rippled across the entire industry chain: numerous joint-venture automakers have scaled back production capacity, and many ICE vehicle plants have either shut down or shifted to NEV manufacturing. Dealerships are experiencing sharp profit declines, leading to frequent store closures or exits from brand networks. Used ICE vehicle prices have also fallen in tandem, destabilizing the traditional valuation framework. The industry forecasts that the market share of fuel-powered vehicles will continue to shrink, dropping below 10% by 2035 as they gradually exit the mainstream consumer market.