The China Passenger Car Association (CPCA) has released data showing that nationwide passenger car retail sales reached 1.461 million units in July 2026, marking a 20.9% decline compared to the same period last year. On a month-on-month basis, sales fell by 8.8%. Cumulative retail sales for the January-to-July period stand at 10.173 million units, a 20.3% decrease year-on-year.
July's domestic passenger car market exhibited a "sustained pressure on total volume, a weakening sequential trend, and extreme structural divergence," according to the CPCA. The off-season downturn was pronounced, and the industry's structural adjustments continued to deepen. The market weakness in July was attributed to multiple converging factors, including an oil price rebound, a weakening macroeconomic environment, the seasonal off-season, a pull-forward of demand, and policy transitions.
Geopolitical tensions causing disruptions in the Strait of Hormuz have driven international oil prices upward, with cumulative domestic gasoline price increases hitting 1,575 yuan per ton in 2026. This has significantly raised the cost of vehicle ownership, leading to a sharp contraction in demand for gasoline-powered passenger cars, though the impact on commercial vehicles has been minimal. Concurrently, the July CPI and PPI saw month-on-month declines, and the PMI indicated a downturn in business activity. Consumer income and spending expectations remained cautious, with weak demand for big-ticket durable goods, dragging down the automotive market.
High temperatures in July suppressed foot traffic at dealerships, while mid-year sales pushes in June had pulled forward demand. This resulted in a simultaneous decline in both terminal orders and customer traffic. Furthermore, the implementation of new national safety standards for new energy vehicles raised the industry's technical bar, leading to a short-term disruption as lower-end models were phased out. However, the July Politburo meeting signaled increased fiscal support and measures to boost domestic demand and consumption, providing a floor for the market. The CPCA views the current downturn as a phase of structural volatility rather than a systemic deterioration of the industry.
Overall, the July passenger car market displayed five key characteristics. First, total volume remained under pressure while structural divergence was extreme, with "gasoline cooling sharply and new energy leading strongly" as the core theme, driven by oil price fluctuations. Second, the gasoline vehicle segment contracted across the board, with pure gasoline models nearly stalling, while hybrids were relatively more resilient. Third, the new energy vehicle (NEV) penetration rate continued to hit new highs, and the industry shifted from price competition to value competition. Fourth, exports continued to provide a supporting role, stabilizing automaker wholesale figures and production capacity. Fifth, industry inventory continued to decline healthily, and operating pressure was gradually easing.
In July, gasoline vehicle retail sales fell 41% year-on-year, with pure gasoline vehicles down 44% and conventional hybrids down 4%. Within the gasoline segment, domestic brands declined 46%, mainstream joint ventures dropped 40%, and luxury brands fell 28%. NEV retail sales in July were down 3.9% year-on-year, with domestic brands falling 4%, mainstream joint ventures growing 36%, and luxury brands declining 23%. Domestic brands sold 1.04 million vehicles in July, down 14% year-on-year and 6% month-on-month, capturing a 71.0% retail share, a 5.4 percentage point increase. Mainstream joint venture brands sold 290,000 vehicles, down 35% year-on-year and 12% month-on-month. German brands held a 12.4% share, Japanese brands 10.9%, and American brands 4.2%. Luxury car sales totaled 130,000 units, down 27% year-on-year and 23% month-on-month.
Exports and Production
Passenger car exports, including complete vehicles and CKD kits, reached 918,000 units in July, an 87.8% surge year-on-year and a 4.9% increase month-on-month. Exports accounted for 41% of total automaker sales. NEVs made up 58.8% of total exports. Domestic brand exports reached 775,000 units, while joint venture and luxury brand exports totaled 143,000 units. Passenger car production in July was 2.222 million units, down 1.6% year-on-year and 4.9% month-on-month. Luxury brand production fell 21%, joint venture production dropped 35%, and domestic brand production rose 12%.
Wholesale figures for July showed 2.252 million units, a 0.2% decline year-on-year. Domestic automakers wholesaled 1.733 million units, up 9% year-on-year, while mainstream joint venture automakers wholesaled 315,000 units, down 30%. Luxury car wholesale was 204,000 units, down 5%. Automakers achieving over 20% wholesale growth year-on-year included Byd Company Limited, Chery Automobile, SAIC Motor Passenger Vehicle, BYD COMPANY, Leapmotor, NIO, and others. The market concentration increased, with the top five automakers by wholesale volume accounting for just over 50% of the market.
Inventory levels declined significantly, with the industry overall destocking by 640,000 vehicles in the first seven months of 2026. This compares to a destock of 250,000 vehicles in the same period of 2025.
New Energy Vehicle Market
NEV production reached 1.449 million units in July, up 25.6% year-on-year. NEV wholesale sales hit 1.446 million units, a 21.3% increase year-on-year. NEV retail sales were 951,000 units, a 3.9% decrease year-on-year. Conventional gasoline vehicle retail sales were 510,000 units, plummeting 41% year-on-year. NEV exports from manufacturers totaled 540,000 units, a massive 147.8% increase year-on-year.
The NEV penetration rate in wholesale was 64.2% in July. For domestic brands, this rate was 73.6%; for luxury brands, 57.1%; and for mainstream joint venture brands, 17.1%. Pure electric vehicle (BEV) wholesale sales were 958,000 units, up 28.6% year-on-year. Plug-in hybrid (PHEV) wholesale was 387,000 units, up 14.6%, while range-extended electric vehicle (EREV) wholesale was 100,000 units, down 7.5%.
In the retail segment, the NEV penetration rate was 65.1% in July. Domestic brands accounted for 64.6% of NEV retail share, mainstream joint ventures 4.5%, and new energy vehicle startups 26.8%. BYD COMPANY, Geely Automobile, and Great Wall Motor Company Limited were among the leading NEV startups. In July, 20 automakers achieved monthly NEV wholesale sales of over 10,000 units, accounting for 93.6% of total NEV volume. BYD COMPANY led with 410,612 units, followed by Geely, Chery, and Leapmotor.
Market Outlook for August 2026
The passenger car market in August 2026 is expected to show a "weak recovery in total volume and strong structural divergence." The 21 working days and the continued high-temperature off-season will result in a slow recovery. The impact of rising oil prices will continue to suppress gasoline vehicle demand while benefiting NEVs. The latest macroeconomic data indicates weak consumer and manufacturing activity, constraining the market's recovery. However, the policy framework from the July Politburo meeting, including measures for trade-in programs and boosting consumption, is expected to provide support. The supply side is also changing, with a significant trend toward larger NEVs. The market is seen as being in a bottoming and recovery phase, with declines expected to narrow gradually, laying the groundwork for the traditional "Golden September and Silver October" sales period.
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