Chongqing - In May, China’s retail sales of narrow-sense passenger vehicles reached 2.316 million units, up 12% year-on-year, according to data from Cui Dongshu, Secretary-General of the China Passenger Car Association (CPCA). New energy vehicles (NEVs) surged 34% to 1.22 million units, while internal combustion engine (ICE) vehicles fell 3% to 1.09 million.

NEVs captured 52.7% of total sales in May, the highest monthly share since June 2024. Cui attributed the strong momentum in the NEV sector to favorable policies such as vehicle trade-in subsidies, scrappage incentives, and purchase tax exemptions.

At the Chang'an Automobile plant, rows of Chang'an fuel-powered vehicles await inspection. (Photo/Changan Auto)

In contrast, ICE vehicles saw their market share drop below 50% for the second month in a row, hitting a record low of 47.3% in May—the lowest since June 2024. Cui noted this decline reflects a broader shift, as NEVs continue to gain ground through rapid technological advances, while innovation in new ICE models has stalled.

As NEVs gain ground, mounting pressure on the ICE market is intensifying competition across the industry. The shift is widening gaps not only between JV and domestic brands, but also within each group—among JV brands and among domestic players alike.

According to Xinhua, Xue Haitao, Deputy General Manager of SAIC-GM, stated that Buick is determined to capture a larger share of the shrinking ICE market and align its strategy across the entire organization.

CPCA data shows that among JV brands, FAW-Volkswagen and SAIC Volkswagen remain the top performers, with May sales of 105,300 units (+9% YoY) and 81,600 units (+5% YoY), respectively. Toyota's joint ventures showed mixed results: GAC Toyota’s sales declined 6% year-on-year to 56,900 units, while FAW Toyota posted a 30% increase to 66,300 units. Dongfeng Nissan recorded a 20% drop, selling 45,000 units.

Among domestic brands, Chery and Geely led the pack with May sales of 139,900 units (-1% YoY) and 97,700 units (-5% YoY), respectively. Changan’s performance was weaker, with sales falling 19% to 58,000 units.

Cui emphasized that although Chinese brands are making strides, they still lag behind JVs in ICE vehicle technology. JV automakers retain an edge in engineering depth, with Chery, Geely, and FAW-Volkswagen holding relatively strong market positions—particularly FAW-Volkswagen, which continues to lead among JVs.

Facing growing pressure from NEVs and a saturated market, ICE automakers have turned to price cuts as a key competitive tactic. CPCA data indicates that from January to May 2025, the average discount on new ICE vehicles was 17,000 yuan, or 8.9%. In May alone, the average discount reached 1,000 yuan, with a price reduction rate of 0.5%.

Promotional discounts for ICE vehicles have hovered around 22% for ten consecutive months. A major trend has been the adoption of the "one-price" strategy—standardized pricing across the country—to increase transparency and streamline the car-buying process. Previously, consumers often faced inconsistent dealership pricing and were forced to shop around for the best deal.

In September 2024, Buick became the first brand to implement "official price cuts," reducing prices by 50,000 to 60,000 yuan on key models. The move led to a notable sales rebound and was soon adopted by Toyota, Volkswagen, and others.

However, the pricing tactics offer only a short-term boost. Xue said the ICE vehicle market has become inventory-based competition, where price wars are ultimately unsustainable. He stressed that breaking through will require a comprehensive restructuring of the value chain—streamlining layers between manufacturers and dealers, and enhancing product quality, service, and technological capabilities across the board.