Penetration Rate 63%?! Automotive Elimination Race, Major Shift!

June 3, CPCA announced a set of data: May 1-31, national passenger car market new energy retail penetration rate 63%.

63%! Yes you read it right, this is a historic high, the second highest in history was last month, April was 61.4%, just tell me if this sounds exaggerated.

According to the trend of penetration rate increase in the past two years, the peak seasons of September and October in the future, it is estimated that September breaking through 65% should be very easy.

So, in this macro context, can fuel cars really not hold on? What major events happened recently? Where are new cars going in the future? How should car companies fight this tough battle? The article is a bit long, let us review it in depth together.

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It is not that EVs are too strong, but fuel cars can't hold on

First look at a set of key data: May national passenger car total retail 1.545 million vehicles, down 20% YoY; new energy retail 974,000 vehicles, down 5% YoY. The reverse calculation result of 63% penetration rate is, fuel cars May retail only about 570,000 units, and same time last year this number was above 850,000. There is a very accurate judgment in the industry, "It's not that EVs are too strong, but fuel cars have systemic decline".

Fuel prices are the most direct driver. Since March 2026, domestic gasoline prices adjusted five times in a row, accumulated increase of 2,115 Yuan per ton, translating to an increase of 1.7 Yuan per liter. Friends who drive fuel cars pay hundreds more every month, the thought of changing cars naturally popped up.

Plus in May car companies capitalized on the May Day holiday node to launch new products and push terminal benefits, interest was definitely boosted. But looking at weekly trends, May retail presented a typical characteristic of "high start, low middle, tail recovery": first week daily average 31,000 units, second week surged to 51,000 units (holiday orders released in bulk), third week dropped back to 39,000 units, fifth week surged to 79,000 units.

These data show that current consumers are very rational, look if there is promotion, wait if nothing happens, not impulse spending.

Another key signal is pure electric "defeat decisively" fuel cars for the first time in April: pure electric insurance coverage volume 573,000 units, exceeding fuel cars by nearly 20,000 units, this is the first time in history. In the top 10 sales models, fuel cars remain only Geely Bin Yue one model, "9 EVs to 1 Fuel Car" structure for the first time became concrete.

The underlying logic is battery cost dropped from 180 USD/kWh in 2018 to about 70 USD/kWh in 2026, decline over 60%; 70,000 yuan level pure electric range already exceeds 400 km, 800V high voltage platform reduced fast charging to "time to drink a cup of coffee" level. It is not that consumers suddenly stopped liking fuel cars, but EVs really became easier to drive, better to use, and cheaper.

•Five Major Recent Events, Where is the Industry Inflection Point

Event 1: BYD x Sinopec Join Forces to "Build Network"

Early June, BYD and Sinopec signed strategic cooperation, core eight characters: "10,000 Stations Energy Gathering, Flash Refueling". BYD already has over 6,100 flash charging stations, target 20,000 stations by end of 2026; Sinopec holds over 30,000 comprehensive energy stations nationwide, 14,000 charging swapping stations. These two joined hands, energy replenishment density directly reached a new level. Almost simultaneously, GAC also announced cooperation with Sinopec, focusing on county level one-stop service.

After penetration rate passes 60%, top competitor radius expanded from "whose car is better" to "whose recharging network is denser, whose aftermarket ecosystem is more complete". Whoever controls "recharging entry point", whoever locked user lifetime value.

Event 2: Volkswagen Unveils New Generation Plug-in Hybrid

Suppressed by domestic brands for three years, Volkswagen finally deployed new generation PHEV strategy: Tiguan L ePro, Passat ePro already listed, Tayron L PHEV and Magotan PHEV follow end of June. Core is EA211 1.5T dedicated hybrid engine plus TQ251 transmission. And on SAIC Volkswagen ID. ERA 9X also installed brand's first EA211 Gold Range Extender, first hour of listing locked orders 11,079 units. Attitude is clear: Joint ventures don't plan to admit defeat.

Interestingly, Toyota relies on HEV to survive quite well in China, electrification share approaches 50%, net profit continues to strengthen.

This shows not everyone believes pure electric is the only way out, in remaining fuel car market, "Hybridization" is joint ventures' last moat.

Event 3: Range Extender Tide Receding, Plug-in Hybrid Instead Rising

Li Auto range extender share dropped sharply from 97.5% a year ago to 33.4%, L6 monthly sales from 25,800 units dropped to 4,900 units. Reason not complex: highway service area supercharging network coverage rate over 98%, national public charging piles reached 4.907 million, range extender "still have fuel when no power" core selling point greatly diluted.

But note a counter-intuitive phenomenon: May plug-in hybrid retail still grew 29.7% YoY, is the only high-growth core category in all passenger cars. Why? Because it snatches not pure electric share, but fuel cars. In tier 3-4 cities and towns with incomplete charging conditions, plug-in hybrid is still the most practical bridge for "fuel to electric transition".

Event 4: Policy "Tightening", Wild Growth Days Over

GB 38031-2025 "Safety Requirements for Power Batteries for Electric Vehicles" will be implemented on July 1, 2026, industry calls it "Strictest in history", covering 7 cell tests plus 17 system tests, core is four characters: No fire, no explosion.

At the same time, national subsidies phase out by 20%, plug-in hybrid subsidies canceled, policy subsidies withdrawing, market support must be self-generated. This is good news: truly capable companies never rely on subsidies to live.

Event 5: NEV Exports Become Main Force Going Overseas

April NEV exports 406,000 units, surpassed fuel car exports for the first time, accounted for over half of total passenger car exports, but EU waves tariff stick at China pure EVs, while plug-in hybrid still subject to 10% basic tariff, instead let China PHEV find breakthrough to open Europe, plug-in hybrid Europe sales YoY surged 368%.

2026 domestic new energy passenger car overseas market share already leaped to 23%, globalization became key valve to counter domestic Red Ocean.

•Where Are New Cars Heading in Future? Three Main Threads Clear

Main Thread 1: Powertrain Routes Three-layer Structure Solidified, Not Pure Electric Dominates

Future will stabilize at three-layer structure: first layer pure electric main channel, 800V+ Silicon Carbide cost continues to drop, 100,000-200,000 yuan range fully electrified;

Second layer plug-in hybrid transition layer, especially in below tier 3 and no home charging scenarios, plug-in hybrid is still most practical choice for fuel to electric;

Third layer niche scenarios, range extender retreats to high-end off-road, fuel contracts to commercial and ultimate downmarket. Range extender tide receding ≠ plug-in hybrid tide receding, latter May 29.7% growth already explains problem.

Main Thread 2: Product Iteration from "Year Update" to "Season Update", Hardware War Turns Software War

Penetration rate 63% means "whether it is NEV" already moved out of decision tree, car selection returns to price-performance, intelligence, brand trust three things. Hardware homogenization accelerates, same price range pure electric SUV range all 600km+, all have 800V, spec stacking marginal returns diminishing. Iteration cycle forced to compress to "one major mid-year update a year or even season update", but this road cost is extremely high.

Real winning point at software and service: smart driving experience consistency, OTA iteration quality, car system ecosystem stickiness, recharging benefit convenience. Voyah's Lu Fang said very appropriately: "Future way out, one is accelerating to replace fuel cars, other is taking capacity, brand, products out."

Main Thread 3: Supply Chain Vertical Integration Not Optional, Survival Necessity

2026 January-April auto industry sales profit margin dropped to 3.4%, making a car earns less than a mid-range phone. Battery takes BOM cost 30%-40%, not making cells oneself equals giving profits to others.

BYD, Geely's self-developed battery routes have verified this path. At same time recharging ecosystem control increasingly key, BYD binds Sinopec, Nio insists on battery swapping, Huawei forms supercharging alliance, charging experience is brand experience, cannot be fully outsourced. Two-tier brands unable to achieve vertical integration or scale negotiation, profits will be squeezed from both sides until exit.

•How Should Car Companies Fight This Tough Battle?

Top Domestic (BYD/Geely/Changan/Chery): Defend domestic title and expand abroad dual line. Continue vertical integration three-electric systems, nail down cost advantage; shift from "selling cars" to "operating users", recharging network, financial insurance, residual value management full lifecycle lock-in; accelerate overseas localization, Thailand, Hungary, Brazil factories must actually turn, avoid tariffs, get local subsidies.

New Forces (Li Auto/Nio/Xpeng/Xiaomi): Li Auto most urgent is wean off range extender dependency, complete pure electric second curve scale validation, otherwise valuation and cash flow will be double-hit compressed. Nio must run through battery swap break-even point. Xiaom proved brand momentum + software experience can break involution, but needs to prove more than one car is competitive. Common proposition: must achieve sustained positive gross margin in certain niche, burning cash for market share story capital market no longer believes.

Joint Venture Brands (Volkswagen/Toyota etc): Hybridization to survive, Intelligence leveraging. Volkswagen path clear: new generation PHEV + Local smart driving cooperation (Equity in Xpeng, Partnering with Horizon Robotics), use hybrid transition to protect sales, use Chinese smart driving to supplement experience gap. Toyota earns profit from HEV short term effective, but long term needs bZ series to truly turn over. GM, Ford, Korean brands if haven't yet produced China exclusive NEV platform, window period remaining less than 24 months.

2nd/3rd Tier Domestic and Edge Brands: Either huddle together, or exit. Without million unit scale, without three-electric self-research, without differentiated positioning, at 3.4% profit margin cash flow can't support a full cycle. Way out only three: integrated by top players, focus on super narrow niche (hardcore off-road/commercial customization), or switch to overseas OEM/ODM.

•Electric EV:

Penetration rate 63%, declares incremental carnival ends, existing market slaughter begins.

From policy driven to market driven, from price war to value war, from fighting alone to ecosystem showdown.

70% ceiling faintly visible, but real war, not in penetration rate numbers, but in every charging pile, every OTA, every bit of user trust.

This dramatic change, are you ready?