Market Report

No. 26 | 20^th  July 2026: China’s petrol car market loses ground as BEVs accelerate

BEV production overtook petrol car production in China for the first time in May. Chinese automakers produced 937,000 BEVs in May 2026, compared with 702,000 petrol cars, marking the first month in which production of fully electric passenger cars exceeded that of petrol cars. BEVs accounted for 41.8% of passenger car production during the month, while petrol fell to 31.3%. This is a sharp change from May 2025, when petrol cars still accounted for 44.9% of production and BEVs for 32.6%, and shows how quickly China’s auto market is moving away from conventional ICE vehicles.

The longer-term trend has been building for several years. In 2020, petrol cars accounted for more than 90% of Chinese passenger car production, while BEVs made up only a small share of the market. Since then, BEVs and PHEVs have increased their market share consistently, supported by falling costs, broader model choice, the proliferation of charging infrastructure and changes in consumer preference. Over the first five months of 2026, petrol cars accounted for 42.5% of production, down from 47.9% in the same period last year, while BEVs rose to 33.4% from 30.6%. Including PHEVs, new energy vehicles (NEVs) accounted for 52.4% of production over January-May, compared with 48.4% in the same period of 2025.

Higher petrol prices linked to the Middle East conflict may have accelerated the shift. The conflict has lifted oil and pump prices, along with raising concerns about potential shortages. Higher petrol prices increase the running costs of ICE vehicles, making BEVs and PHEVs more economically advantageous. This could be contributing to weaker petrol car demand, with petrol supply down 17% year-on-year over the first five months of 2026 and down 32% year-on-year in May alone. In contrast, BEV production was up 24% year-on-year in May, despite the overall passenger car market being slightly lower. Therefore, the latest data is consistent with fuel prices, reinforcing the existing trend towards electrification.

Rising exports are an increasingly important factor in China’s auto sector. Chinese annual passenger vehicle exports have risen from around 0.78 million units in 2020 to around 6.04 million units in 2025, while the monthly run rate has accelerated sharply in 2026. Weaker domestic sales this year have incentivised Chinese automakers to look abroad for sales. Passenger vehicle exports reached around 1.04 million units in June, with NEVs accounting for over 50% of total exports. Europe remains an important part of this story, with ACEA data showing that more than 1.0 million Chinese-made cars were imported into the EU in 2025, accounting for 7% of total EU car sales and 20% of EU BEV sales.

For PGM demand, rising Chinese BEV exports displace autocatalyst demand, but ICE, HEV and PHEV exports into Europe still require autocatalysts that comply with EU regulations and carry relatively high catalyst loadings compared with vehicles sent to less strict jurisdictions. It remains to be seen whether the recent acceleration in China’s longer-term electrification trend reverses if the Iran conflict ends and oil prices fall back, or whether higher fuel prices have simply brought forward a shift that was already becoming embedded. Global automotive demand for palladium could fall by more than 5% this year owing to lower overall production in China and the ongoing shift to BEVs. This is not price supportive, but the palladium price is already down over 40% from its January high.

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