China's Auto Market Weakens Further on Subdued Domestic Demand

By Jiahui Huang

China's auto market remained under pressure in July, as higher oil prices and a weak macro environment weighed on demand.

Retail sales of passenger cars fell 20.9% in July from a year earlier to 1.46 million units, the China Passenger Car Association said Tuesday. Sales fell 8.8% compared with June.

After 10 straight months of declines, auto sales didn't show a recovery at the start of the second half of the year. Instead, the market weakened further amid higher oil prices, a seasonally slow period and demand pulled forward by sales campaigns in June, the CPCA said.

Disruptions caused by the Strait of Hormuz's closure pushed up oil prices, while domestic gasoline prices have risen sharply this year, raising the cost of owning and maintaining a fuel-powered car for the public, the agency said. This has further weakened demand for conventional vehicles while accelerating the shift toward electric vehicles and hybrid cars, the agency said.

Meanwhile, new-energy vehicles, a term used to describe both EVs and hybrid cars, continued to gain market share. New-energy cars accounted for 65.1% of total sales in July, the agency said. That said, retail sales of new-energy cars fell 3.9% from a year earlier to 951,000 units in July.

Robust exports provided some support to Chinese automakers and helped offset weak domestic demand. China's NEV exports more-than doubled again in July, while total vehicle exports reached 918,000 units last month, CPCA data showed.

In July, Tesla exported 66,330 units made at its Shanghai plant and sold 93,579 units to Chinese buyers.

China's passenger-car market will likely remain in a bottoming-out phase in August, with an expected gradual recovery constrained by the seasonal slowdown, higher oil prices and weak consumer demand in general, the CPCA said.

The market is also seeing a widening structural divide within the new-energy car segment, with automakers increasingly shifting toward larger and higher-value models. Of the new-energy models launched in the first seven months this year, 49 were longer than five meters, the CPCA said.

The supply of smaller and entry-level cars has shrunk sharply. Only one new-energy model launched in the first seven months of this year was shorter than four meters, compared with five during the same period of last year, the CPCA added.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

August 11, 2026 05:23 ET (09:23 GMT)