China’s new energy vehicle (NEV) retail sales recovered from August’s pace but remained below year-earlier levels in the first half of September, as automakers pushed for volume without strong order backlogs and pure gasoline vehicle production collapsed by half.
Retail sales of passenger NEVs totaled 362,000 units in September 1–13, down 10% year over year but up 16% from the same period last month, the China Passenger Car Association (CPCA) said Wednesday.
The share rose because the wider market shrank faster than the NEV market did. Both were down. That is above August’s full-month record of 65.2%, and the mechanism is the same.
The CPCA warned against reading the figure as demand.
Most NEV brands currently lack strong-selling models, but manufacturers still need to maintain steady production, the association said. Sales efforts have become target-driven, with automakers pushing for volume even without order backlogs.
The result is slightly improved direct retail sales from manufacturers and an NEV penetration rate the CPCA described as “unusually high.”
Wholesale Outperforms Retail
NEV wholesale sales showed stronger momentum. Manufacturers shipped 411,000 NEVs in September 1–13, up 1% from a year ago and 26% from the same period last month.
NEV wholesale sales reached 10.19 million units since the beginning of 2026 — an increase of 9% year over year.
NEV wholesale penetration stood at 74.7% during the period, reflecting continued strength in exports.
The gap between wholesale and retail — now 3.15 million units on a year-to-date basis — underscores how heavily Chinese automakers rely on overseas shipments to sustain production volumes.
NEV exports surged 154.7% in August alone, accounting for 58.4% of total vehicle shipments.
ICE Production Collapses
The combustion vehicle decline deepened on the production side.
Pure gasoline vehicle output totaled 215,000 units in September 1–13, down 51% year over year, while plug-in hybrid production fell 20% to 174,000 units.
The production figures point to a factory-level retrenchment in internal combustion capacity.
As NEV offerings expand and fuel costs rise, manufacturers are allocating fewer resources to gasoline powertrains — a shift that accelerates the structural contraction already visible in retail data.
In August, conventional fuel vehicle retail collapsed 40% to 540,000 units, with pure ICE models dropping 45%.
Japan’s big three automakers all posted double-digit year over year sales declines in China that month.
Broader Market Under Pressure
Total passenger vehicle retail sales reached 515,000 units in September 1–13, down 23% year over year but up 4% from the same period last month.
Passenger vehicle retail totaled 12.23 million units since 2026 began, a 21% decline compared to the same period last year.
Average daily retail sales were 35,050 in the first week of September (September 1–6), down 19% year over year and 1% from the same period in August.
In the second week (September 7–13), the daily average rose to 43,515, down 26%.
Passenger vehicle wholesale sales totaled 550,000 units in September 1–13, a 22% decline from a year ago — and the same 22% increase from the same period last month.
Year-to-date wholesale reached 17.73 million, down 6% year over year.
The sequential improvement is consistent with the start of China’s traditional “Golden September” peak sales season.
Still, year over year declines remain steep, however, in part because of a high comparison base.
Regional subsidies expiring in September 2025 triggered a rush of purchases that pushed retail to a record for that month, distorting this year’s growth figures.
Target-Pushing vs Demand
The CPCA flagged an unusual dynamic behind the elevated NEV penetration readings. Most NEV brands currently lack strong-selling models, but manufacturers still need to maintain steady production, the association said.
Sales efforts have become target-driven, with automakers pushing for volume even without order backlogs.
The result is slightly improved direct retail sales from manufacturers and an NEV penetration rate the CPCA described as “unusually high.”
Most of China’s major EV makers trailed their annual targets at the half-year mark, with completion rates below 40%, increasing the pressure to accelerate deliveries in the second half.
Beijing’s latest industry plan, published September 9, set a formal target for NEVs to capture 70% of domestic passenger car sales by 2030 — a threshold early September data shows the market is already approaching six years ahead of schedule, albeit on a weekly rather than full-month basis.
Fuel Prices and Seasonal Factors
High gasoline prices remain the main factor depressing combustion vehicle sales, the CPCA said.
Cumulative price increases have exceeded 830 yuan ($122) per tonne since late July, the association said, after rising by nearly 985 yuan per tonne over the course of July alone. The CPCA has attributed the underlying oil price moves to disruption to shipping through the Strait of Hormuz.
Running costs now weigh more heavily in purchase decisions, and the CPCA has previously described the shift as an “oil-to-electric substitution trend.”
The CPCA said local consumption incentives, automaker promotions and the continued ramp-up of recently launched models should support the September market.
The halving of China’s NEV purchase tax exemption for 2026 and 2027 — before full removal in 2028 — initially cooled demand at the start of this year, and the association described the first quarter as a subsidy adjustment period.
A sustained recovery in NEV retail volumes has yet to materialize, with year-to-date sales still 12% below 2025 levels despite the penetration rate continuing to climb.
September and October data will determine whether the market is entering a genuine rebound or stabilizing at lower volumes, with the CPCA’s earlier forecast of a return to growth in the fourth quarter still contingent on macroeconomic improvement and oil price trends.
