China's 2024 Vehicle Sales Reach 23 Million, Facing Overcapacity

China, the world’s largest automotive market, sold 23.1 million passenger vehicles in 2024, a 5.3% increase from the previous year, according to the China Passenger Car Association (CPCA). While demand for electric and hybrid vehicles reached record highs, with 47.2% of total sales, overcapacity among manufacturers is driving industry-wide reorganization. Local brands like BYD, Geely, and Xiaomi emerged as market leaders, yet challenges around profitability and fierce competition persist.

Despite the growth in sales, Chinese automakers utilized only about half of their production capacity in 2024, estimates Stephen Dyer, Managing Director,  AlixPartners. The disparity between capacity and demand has forced manufacturers to cut prices and explore foreign markets. “There will be a lot of consolidation and contraction among smaller companies,” said Sam Fiorani, Vice President, AutoForecast Solutions.

Foreign brands have also struggled to maintain market share. General Motors, Volkswagen, and Toyota experienced declining sales, with domestic brands now commanding 61% of the market—an increase of 8.6% points from the previous year.

Electric and hybrid vehicle sales in China increased by 40.7%, buoyed by government subsidies for new energy vehicles. Over 6.6 million vehicles benefited from subsidies of up to US$2,800 in 2024, compared to US$2,000 for more efficient combustion vehicles. BYD led domestic sales, with nearly 4 million units sold, outpacing Tesla, which reported a record 662,000 units sold in China. Tesla China implemented aggressive pricing strategies, offering zero-interest loans and significant discounts. 

To mitigate overcapacity, Chinese automakers are turning to exports. However, trade restrictions pose significant hurdles. The European Union imposed tariffs of up to 45% on Chinese electric vehicles, and the United States implemented a 100% tariff. Despite these barriers, Chinese vehicle exports have continued to grow, albeit at a slower pace.

China’s automotive industry faces diminishing profitability, with margins dropping to 4.4% in 2024 from 6.2% in 2020. Analysts predict economic uncertainty and reduced incentives could result in a sales decline in 2025. Deutsche Bank analyst Bin Wang anticipates that an extended subsidy program may boost sales by 3 million units in 2025.

“The 2025-2027 period will mark the elimination round in the automotive sector. Competition in 2025 will be fiercer than ever,” said Xiaopeng, CEO, Xpeng. He also forecasted further industry restructuring.