China’s auto market faced further declines in July, with passenger car retail sales dropping 20.9% year-on-year to 1.46 million units, per the China Passenger Car Association (CPCA). Sales also fell 8.8% month-on-month from June. Despite earlier expectations of recovery, the market weakened due to higher oil prices, a sluggish macroeconomic environment, and seasonal demand slowdowns. The CPCA noted that oil price spikes, partly driven by Strait of Hormuz disruptions, and rising domestic gasoline costs have reduced affordability for conventional vehicles, accelerating shifts to electric and hybrid cars.

The association highlighted that higher oil prices and seasonal factors offset any potential rebound from June sales campaigns. Domestic gasoline prices have surged this year, increasing ownership costs and dampening consumer confidence. This trend, combined with broader economic headwinds, has kept auto sales subdued, with no signs of recovery in the second half of the year.

CPCA data underscores a structural shift in the market, with electric vehicles gaining traction amid rising fuel costs. However, overall demand remains weak, reflecting both economic challenges and external factors like geopolitical tensions affecting oil supplies. The association did not provide specific projections for August but emphasized the need for policy support to stabilize the sector.