TLDRs;
- China’s electric vehicle (EV) sales hit a record 826,000 units in September, up 28.5% year-on-year.
- The surge comes ahead of a January 2025 tax shift introducing a 5% levy on EV purchases.
- Current subsidies worth up to 20,000 yuan end in December, fueling a nationwide buying rush.
- Analysts warn a potential sales slowdown in early 2025 as incentives phase out and taxes rise.
China’s electric vehicle market reached a new milestone in September, with sales of pure electric vehicles (EVs) soaring to 826,000 units, a 28.5% year-on-year increase, according to data from the China Passenger Car Association (CPCA).
The figure surpasses the previous record of 762,000 units set in December 2024, underscoring China’s dominance in the global EV industry.
The spike comes as Chinese consumers rush to take advantage of generous government incentives before they expire at the end of the year. For now, buyers still enjoy a complete sales tax exemption on EVs, alongside cash subsidies that make switching from gasoline to electric more affordable. But the clock is ticking.
Tax Shift Sparks Buying Frenzy
From January 2025, China’s EV policy will undergo a major transition: the current tax exemption will be replaced with a 5% sales tax, which is set to rise gradually to 10% by 2028.
That tax shift could translate to an extra 12,500 yuan (US$1,757) on the average 250,000 yuan EV, effectively erasing much of the financial advantage that consumers currently enjoy.
Adding to the urgency, China’s trade-in subsidies are also scheduled to end in December. Buyers who swap older vehicles for electric ones still qualify for a 20,000 yuan (US$2,809) rebate, while those trading in petrol cars receive 15,000 yuan (US$2,107). Together, these incentives have fueled an unprecedented end-of-year buying spree, pushing dealerships and manufacturers to record sales volumes.
The Road Ahead
While September’s record signals strong short-term momentum, analysts expect a market correction in early 2025. Once the tax exemption expires, EVs will face the same cost pressures that have slowed growth in other markets, such as Europe, where incentives are already winding down.
The CPCA estimates China’s car market exceeds 2 million vehicles per month, meaning even a small pullback in EV demand could ripple through the industry. The key question is whether domestic automakers like BYD, Nio, and XPeng can sustain interest through new models and technology upgrades as policy support wanes.
Still, China’s long-term EV outlook remains solid. The government continues to prioritize electrification as a pillar of its carbon reduction goals, and consumer appetite for EVs shows little sign of disappearing.
Used EVs Enter the Spotlight
Another emerging challenge lies in China’s used EV market, which is set to expand rapidly as more owners trade in their cars for newer, subsidized models. The 20,000 yuan trade-in incentive will likely flood the secondary market with older EVs.
However, resale values for used EVs remain low due to battery degradation and rapid technological advancements. According to CPCA secretary-general Cui Dongshu, the average EV lifespan in China is about 10 years, compared to 18 for petrol vehicles. Building consumer confidence in used EVs will depend heavily on battery health diagnostics and certification.
Companies that can offer battery state-of-health (SOH) analytics, tools that verify the remaining capacity of an EV battery, stand to benefit. In the U.S., used EVs that qualify for rebates sell six times faster, a similar system in China could unlock a thriving market for affordable, pre-owned electrics.
