In the opening six months of 2025, China has retained its position as the fastest growing major electric vehicle (EV) market with sales in the region up 32% YTD. Europe’s EV market has grown 26% YTD and North America’s just 3% according to Rho Motion’s EV & Battery Database.
China’s strong EV market growth continues to be underpinned by subsidies, as well as a fiercely competitive price environment that has resulted in EVs now being cheaper than their ICE vehicle counterparts in multiple segments. However, in recent months several headwinds have emerged in the Chinese market with the potential to curtail the trajectory of the country’s EV sales growth. …
Negative sentiment creeping in
In June, China’s trade-in scheme was paused in several cities due to the scheme’s first round of funding in those regions having been exhausted. There has also been a reported rise in “zero kilometre” EVs in China, whereby new vehicles are registered, despite remaining unsold, to help OEMs meet sales targets. This comes against the backdrop of reports of unsold inventories increasing in China.
These challenges have been echoed by the reactions of key EV players. BYD reportedly slowed production across several sites, as well as delayed plans for new production lines, due to demand uncertainty, while Li Auto reduced its 2025 sales targets from 700,000 to 640,000, due to lower-than-expected orders for its updated Li L6.
What role does China’s seasonal market play?
It is not unusual for Chinese EV market growth to slow during the summer months, owing to the typical decline in demand following the first half of the year, combined with extreme weather conditions in certain regions. This lull in growth is visible in the graph above, with YTD growth traditionally flattening in the second half of the year.
The trade-in scheme is set to return
Although the trade-in scheme has been paused in certain cities, it has not ended permanently in those areas. The funding is released in two phases, with the second instalment scheduled to support demand during the final six months of the year. Moreover, the regions where funds have already been exhausted only account for a small share of new vehicle purchases, meaning the pause is unlikely to significantly affect national demand for electric vehicles.
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