Recently, the China Association of Automobile Manufacturers (CAAM) released the production and sales data of China's automotive industry for July 2026. According to the data, the total sales volume of automobiles in China reached 2.584 million units in July, a year-on-year decrease of 0.3%.
This nearly flat figure conceals the most drastic structural shift in the history of China's automotive industry: domestic sales fell 23.6% year-on-year, while exports surged 81.3% year-on-year. The overall volume remained largely unchanged, but the composition shifted dramatically.
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- Total automobile sales 2.58
- 40,000 units YoY −0.3%
- Domestic sales 1.541 million units YoY −23.6%
- Exports 1.043 million units YoY +81.3%
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- NEV sales 1.561 million units YoY +23.7%
CAAM attributes the 23.6% year-on-year decline in domestic sales to seasonal factors: the traditional off-peak sales season, the advance release of demand driven by mid-year volume targets, sustained high temperatures nationwide, and the impact of typhoons and floods in certain regions on offline sales.
This explains the month-on-month decline (−8%), but it fails to explain why nearly 500,000 fewer vehicles were sold in the domestic market year-on-year. Therefore, it is still necessary to analyze the automotive operation data for July 2026 from our perspective, hoping to provide insights and inspiration.
Total Volume: The Same July, Eight Metrics, a Span of Nearly 200 Percentage Points
In July, the total production and sales of China's automotive industry reached 2.573 million and 2.584 million units, respectively, down 6.8% and 8% month-on-month, and down 0.7% and 0.3% year-on-year. From January to July, the cumulative production and sales were 17.567 million and 17.602 million units, respectively, both down 3.7% year-on-year, with the decline beginning to narrow compared to the first half of the year.
However, breaking down the total volume reveals an extremely polarized market. This chart is the key to understanding all the debates in July: why some say "historic high" and others say "continuous decline"—they are referring to different metrics for the same month.
Domestic Market: ICE Vehicles Are Exiting at a Rate of Halving Every Month
Returning to the domestic market, the main trend is a dual decline both month-on-month and year-on-year. In July, domestic sales reached 1.541 million units, down 13.1% month-on-month and 23.6% year-on-year. Among them, domestic sales of traditional fuel vehicles were 533,000 units, down 18.4% month-on-month and 45.7% year-on-year. In less than a year, the domestic ICE vehicle market has shrunk by nearly half, while the NEV volume has not changed. Later, we will see which segments of ICE vehicles are being taken over by NEVs.
Cumulative metrics tell the story even more clearly: from January to July, domestic sales were 11.462 million units, down 21.4% year-on-year; among them, domestic sales of traditional fuel vehicles were 5.364 million units, down 30.1% year-on-year. For comparison, domestic sales in 2024 were 25.577 million units (+1.5%) and 27.303 million units in 2025 (+6.7%); previously, domestic market sales had been experiencing mild positive growth.
At the passenger vehicle level, domestic sales of traditional fuel passenger vehicles in July were directly 383,000 units lower than the same period last year; from January to July, the decrease was 2.116 million units. These 2.116 million fewer fuel passenger vehicles constitute the main body of the entire domestic market's contraction. The domestic market sold about 3.12 million fewer units in total from January to July, with fuel passenger vehicles alone accounting for two-thirds.
Breaking down by vehicle class, the contraction of ICE vehicles is not uniform. From January to July, among traditional fuel passenger vehicles, sales in the A00 class and A to C classes all declined to varying degrees. Currently, sales are concentrated in the A class (cumulative 3.592 million units, YoY −17.8%); while the B class fell 24.7% and the C class fell 23.7%. Therefore, mid-to-high-end ICE vehicles in the B and C classes are declining faster than economy models, which used to be the main battleground for joint venture brands and ABB (Audi, BMW, and Benz) luxury vehicles.
In terms of price bands, the main sales range for traditional fuel passenger vehicles is 100,000 to 150,000 RMB, with cumulative sales of 2.061 million units, down 15.5% year-on-year. Meanwhile, the segment above 250,000 RMB generally declined by 30% to 40%, which was also the main battleground for joint venture brands and ABB luxury vehicles.
Overall, the total sales volume in July remained nearly flat, but the figures for ICE vehicles, NEVs, and exports have changed.
Exports: 6.14 Million Units from January to July, Highly Likely to Surpass Last Year's Full-Year Domestic Sales Decline
In July, automobile exports reached 1.043 million units, up 0.6% month-on-month and 81.3% year-on-year, with monthly exports exceeding 1 million units for two consecutive months. From January to July, cumulative exports reached 6.14 million units, up 66.8% year-on-year. Comparing this with the previous two years, full-year exports were 5.859 million units in 2024 and 7.098 million units in 2025. The first seven months of this year have already surpassed the full-year total of 2024.
- NEV exports in July: 553,000 units, YoY +1.5 times, MoM +5.7%
- Traditional fuel exports in July: 490,000 units, YoY +40%, MoM −4.6%
- NEV exports from Jan to Jul: 2.909 million units, YoY +1.2 times
- Traditional fuel exports from Jan to Jul: 3.231 million units, YoY +36.2%
Looking closely at the export data, you will find that the export mix is also undergoing a transition. The share of NEV exports has exceeded 50% for two consecutive months (53.0% in July). However, traditional fuel exports still grew 36.2% year-on-year from January to July, compared to −2% for the full year of 2025.
In other words, the production capacity of Chinese ICE vehicles that would have been sold domestically has not disappeared; it is being absorbed by emerging overseas markets. This is key to understanding this year's capacity utilization rate and the intensity of the price war.
NEVs: The 60.4% Penetration Rate Is the Figure Pulled Down by Exports
CAAM's headline figure is that "the share of NEVs in monthly new car sales exceeded 60% for the first time," reaching 60.4%. However, this is a mixed value across all metrics (domestic + exports), excluding the 490,000 ICE vehicles among the exports. The actual domestic NEV penetration rate is 65.4%.
In July, NEV sales reached 1.561 million units, a year-on-year increase of about 299,000 units. As mentioned above, domestic NEV volume slightly decreased, but the total NEV volume increased. So where did the NEV growth come from?
Checking the data reveals that NEV exports in July increased from about 221,000 units last year to 553,000 units this year, an increase of 332,000 units; while domestic NEV sales were 1.008 million units, down 2.8% year-on-year, a decrease of about 29,000 units. Exports contributed over 100% of the incremental growth, while the domestic market made a negative contribution.
The cumulative metrics tell the same story: from January to July, domestic NEV sales were 6.098 million units, down 11.8% year-on-year, of which domestic NEV passenger vehicle sales were 5.51 million units, down 15.2% year-on-year.
In other words, the domestic penetration rate rose from just over 50% last year to 65.4%, not because NEVs are selling more on their own, but because ICE vehicles are declining faster. This is a market of "passive penetration," which is completely different in investment implications from the "active penetration" seen from 2021 to 2024: it means that vehicle pricing power, channel expansion speed, and the return on new capacity cannot be extrapolated at the slopes of the past few years.
From January to July, cumulative NEV production and sales were 9.014 million and 9.007 million units, up 9.5% and 9.6% year-on-year, respectively. The cumulative share of new car sales broke through 50% for the first time (51.2%). The cumulative share under domestic metrics was 53.2%, of which passenger vehicles accounted for 57.2% and commercial vehicles 32.1%.
Powertrain Routes: PHEVs Have Become an Export Product
In July, BEV (Battery Electric Vehicle) production and sales were 1.096 million and 1.072 million units, up 35.8% and 32.2% year-on-year, respectively; PHEV (Plug-in Hybrid Electric Vehicle) production and sales were 480,000 and 489,000 units, up 10.1% and 8.4% year-on-year.
The gap is even larger on a cumulative basis: from January to July, BEV sales were 6.06 million units (+15.5%), while PHEV sales were 2.946 million units (−0.9%). But the real divergence lies in the completely different market destinations of the two routes.
After stripping out exports:
The domestic PHEV market was about 1.8 million units from January to July, shrinking nearly 30% year-on-year. This is the most drastic single-category change in the domestic market this year, with a steeper relative decline than ICE vehicles. Meanwhile, PHEV exports surged 1.4 times year-on-year, with a growth rate higher than the 1.1 times growth of BEV exports.
PHEVs are transitioning from a "domestic transitional technology" to a "mainstream export technology": in overseas markets with incomplete charging infrastructure, its product logic still holds, whereas domestically it is being rapidly replaced by BEVs. The implication for OEMs is direct: brands with PHEV/EREV (Extended-Range Electric Vehicle) as their main sales structure will face dual pressures on domestic market share and product cycles this year if they have not simultaneously built export capabilities. Retail metrics from the China Passenger Car Association (CPCA) also confirm this, with PHEV retail sales down 21.1% year-on-year and EREV down 16.5% in July, while BEVs grew 6.0%.
Additionally, from January to July, NEV passenger vehicle sales are already mainly concentrated in the B class (cumulative 2.378 million units, YoY +17.9%), while traditional fuel passenger vehicles remain concentrated in the A class. NEVs perform significantly better than traditional fuel vehicles in the B class and above markets.
In terms of price bands, the main sales range for NEVs is 100,000 to 150,000 RMB, with cumulative sales of 1.916 million units, up 19% year-on-year. The main sales ranges for NEVs and traditional fuel vehicles have completely overlapped, meaning the two have entered direct price competition and are no longer segmented markets.
Competitive Landscape: Domestic Brand Passenger Vehicles Account for 77.4%, with Fierce Internal Reshuffling
In July, sales of Chinese brand passenger vehicles reached 1.754 million units, up 9.3% year-on-year, accounting for 77.4% of passenger vehicle sales, an increase of 7.2 percentage points from the same period last year. From January to July, cumulative sales were 10.892 million units, up 0.2% year-on-year, with a share of 72.7%, up 4 percentage points.
Among foreign brands, German brands lead with about 9.8%, while all other brands are in single digits. From January to July, the top 15 groups in sales totaled 16.385 million units, down 3.7% year-on-year, accounting for 93.1% of total automobile sales, flat year-on-year. The concentration level has not changed, but the internal ranking has shifted significantly.
BYD's position has changed. In July, sales were 419,000 units, up 21.8% year-on-year, returning to positive growth on a monthly basis and ranking first for the month. However, cumulative sales from January to July were 2.228 million units, down 10.5% year-on-year, overtaken by SAIC with 2.313 million units to rank second. Under NEV metrics, BYD's share is 24.7%, compared to an estimated 30.3% in the same period last year, dropping over 5 percentage points in a year.
Chery is the biggest winner in this round of the export cycle. From January to July, sales were 1.633 million units (+10.2%), and exports were 1.141 million units (+71%), accounting for 18.6% of the national total exports. In July, exports were 202,000 units, accounting for 19.4% of the monthly total exports—one in every five exported vehicles nationwide is a Chery.
Geely is the only top player achieving "stability both domestically and internationally." From January to July, sales were 1.974 million units (+1.5%), NEV sales were 1.174 million units (+11.8%, faster than the industry's 9.6%), and exports were 710,000 units.
In contrast to SAIC being flat, BYD at −10.5%, FAW at −14.6%, and Changan at −19.4%, positive growth itself is scarce.
Falling behind are the traditional joint venture-reliant groups: Changan at −19.4%, FAW at −14.6%, Dongfeng at −47.1% year-on-year in July, and Brilliance BMW at −19.3%.
The impact of the −30.1% decline in domestic ICE vehicles has almost precisely hit the revenue structure of these enterprises that were originally dominated by joint ventures. The stratification of new forces has been completed.
Leapmotor sold 458,000 units from January to July (+68.4%), and 101,000 units in July (+102%); its scale has surpassed the combined total of NIO, Li Auto, and XPeng. NIO recovered significantly with +68.0%; Li Auto at −4.6% and XPeng at −12.8% are contracting.
Top 10 Enterprises for Complete Vehicle Exports (10,000 units) · All Top 10 Enterprises Achieved Positive Growth in July
Chery's exports in July were up 69.7% year-on-year, and up 71% from January to July. Tesla showed the most significant export growth rate, up 1.4 times in July and 1.3 times from January to July.
Summary
Overall, the July data confirms the tone set in the first half of the year: domestic sales are declining while exports are growing. So how will the trend develop in the second half of the year?
Those who have seen last year's overseas expansion data know that exports began to accelerate in the second half of 2025 (full year 7.098 million units, +21.1%), meaning the year-on-year base rose rapidly starting from the fourth quarter. A significant portion of the current 81.3% growth rate is contributed by last year's low base. Therefore, exports should continue to grow, but the growth figures will not be as explosive as they are now.
Will domestic sales continue to decline?
The Politburo meeting on July 30 deployed economic work for the second half of the year, proposing the implementation of a more proactive fiscal policy and a moderately loose monetary policy, fully leveraging the effectiveness of existing policies, timely planning and introducing practical and effective incremental policies, increasing counter-cyclical adjustment efforts, effectively expanding domestic demand, and creating a fair and orderly market competition environment.
Whether the cumulative domestic decline of −21.4% has bottomed out depends on the intensity and implementation timing of incremental policies. The statement of "creating a fair and orderly market competition environment" also points to further constraints on the price war. There is a mismatch risk in PHEV capacity. Domestic PHEV production can be considered dangerous; first, the domestic PHEV market has shrunk by about 30% year-on-year, while PHEV exports have grown by 140%.
If tariffs or localization requirements in overseas markets (especially Europe) tighten, this portion of capacity has no domestic market to retreat to. This is the most vulnerable link in this year's capacity structure.
References and Images
- Industry Information Department of the China Association of Automobile Manufacturers, "Production and Sales Situation of the Automotive Industry in July 2026" (released on 2026-08-12),
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