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Electric vehicles are expected to outsell cars with internal combustion engines in China for the first time next year, in a historic turning point that puts China’s largest auto market in world ahead of western rivals.

China is set to smash international forecasts and Beijing’s official targets with domestic EV sales – including pure battery and plug-in hybrids – growing about 20 percent annually to more than 12 million vehicles in 2025, according to the latest estimates provided to the Financial Times by four investment banks and research groups. The number will more than double to 5.9 million sold in 2022.

At the same time, sales of traditional powered cars are expected to decline more than 10 percent next year to less than 11 million, representing a nearly 30 percent decline from 14.8 million in 2022.

Meanwhile, EV Sales growth slowed in Europe and the US, reflecting the legacy car industry’s slow embrace of new technology, uncertainty over government subsidies and rising protectionism against imports from China.

Robert Liew, director of Asia-Pacific renewables research at Wood Mackenzie, said China’s EV milestone marks its success in domestic technology development and securing global supply chains for the critical resources needed for EVs and their batteries. The scale of the industry means a sharp reduction in production costs and lower prices for consumers.

“They want to electrify everything,” Liew said. “No other country comes close to China.”

While the pace of EV sales growth in China has slowed from a post-pandemic frenzy, forecasts suggest Beijing’s official target, set in 2020, for EVs to account for 50 percent of auto sales by 2035, achieved 10 years ahead of schedule. . Norway leads the world in EV sales as a market share, with more than 90 percent of new cars powered by batteries.

Industry forecasts were provided to the FT by investment banks UBS and HSBC, as well as research groups Morningstar and Wood Mackenzie.

They explained that in the coming decade, the factories built in China to produce tens of millions of cars with traditional engines will have almost no local market to serve.

They also highlighted how the rapid rise of China’s EV industry now threatens national manufacturing champions Germany, Japan and the US.

While China’s EV market is tracking year-on-year growth of nearly 40 percent through 2024, the market share of foreign-branded cars has fallen to a record low of 37 percent — a sharp decline. from 64 percent in 2020, according to data from Automobility, a consultancy based in Shanghai.

This month alone, GM wrote down more than $5bn worth of its China business; the holding company behind Porsche has warned of a writedown on its Volkswagen stake of up to €20bn; and arch rivals Nissan and Honda said they were responding to a “big change in the business environment” with integration.

Chinese carmakers are facing their own internal rivalry. Yuqian Ding, a veteran Beijing-based analyst at HSBC, said that while EVs are now a “strategically important” part of China’s new, high-tech economy, intense competition is expected to “squeeze” more players out of the market as the industry. consolidated.

“While China’s domestic EV sector is clearly developing, it is also facing slow growth – from a very high base – oversupply of models, intense competition and a price war,” he said. “The longer-term direction of travel is clear – China’s EV juggernaut is unstoppable.”

Tu Le, founder of consultancy Sino Auto Insights, said the industry was only at the “beginning” of an era of unprecedented upheaval.

Vincent Sun, an equity analyst covering China’s auto sector for investment research group Morningstar, noted that many multinational manufacturers, including Germany’s Volkswagen, do not expect to release major new- EV model in China until late 2025 or 2026.

HSBC estimates that about 90 new car models are planned to be released by Chinese manufacturers in the fourth quarter of 2024 – about one a day – and almost 90 percent will be EVs.

However, Paul Gong, head of China automotive research at UBS, warned there was some uncertainty in China’s broader economic policy heading into 2025 and predicted the market would have a “weak start to the year” thereafter. to a strong finish in 2024.

But he added: “We expect . . . a strong surge in purchases by the end of 2025, driven by the expiration of subsidies and the imposition of a 5 percent tax on the purchase of electric vehicles in 2026 – compared to 0 percent until end of 2025.

Additional reporting by Richard Milne in Oslo