China’s Gasoline Car Market Is Crashing as Fuel Prices Surge - Energy | PriceONN
Gasoline car demand in China is slumping on higher fuel prices resulting from the crisis in the Middle East, with gas guzzlers such as Range Rover, fetching discounts of up to 60%, Bloomberg reported, citing Chinese media. The report also cited data from the Chinese Passenger Car Association showing discounts on gasoline cars had almost doubled over the first five months of the year as oil-and fuel-prices crept up. Chinese passenger car sales dropped by over 22% in May, data released earlier...

Demand Collapse for Traditional Autos

The Chinese automotive market is witnessing a dramatic downturn in demand for vehicles powered by internal combustion engines. This sharp decline is directly linked to the escalating cost of fuel, a consequence of ongoing geopolitical tensions in the Middle East. The impact is particularly severe on less fuel-efficient models, with luxury brands like Range Rover now subject to unprecedented price reductions, reportedly reaching as high as 60%.

Recent data from the Chinese Passenger Car Association paints a stark picture. Over the first five months of the year, the extent of discounts offered on gasoline cars has nearly doubled. This aggressive discounting strategy reflects the shrinking consumer appetite for these vehicles as oil and, consequently, fuel prices continue their upward trajectory. The overall passenger car sales figures for May further underscore this trend, revealing a contraction of over 22% compared to the previous year.

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Electrification Accelerates Amidst ICE Decline

In stark contrast to the struggles of gasoline vehicles, sales of electric and hybrid cars in China are experiencing robust growth. These greener alternatives now command a significant portion of the market, accounting for 62.9% of all new car sales. While even these segments saw a modest decline in absolute sales by 7.5% in May, their resilience highlights a fundamental shift in consumer preference and technological adoption.

Despite the overall dip in May sales, there was a sequential improvement compared to April, with a 9.2% increase. This month-on-month recovery, however, does little to offset the year-on-year decline for traditional vehicles. The stark divergence in performance between internal combustion engine (ICE) cars and new energy vehicles (NEVs) signals a critical inflection point for the automotive industry.

Government Intervention Meets Market Realities

Beijing has actively sought to mitigate the impact of rising global oil prices on its domestic market. Measures have included tapping into substantial crude oil reserves to ensure sufficient supply for domestic refiners, particularly since the commencement of hostilities involving the United States, Israel, and Iran. However, these efforts have not entirely insulated Chinese drivers from the economic shock of higher fuel costs.

The nation's imports of crude oil have seen a significant reduction, reaching their lowest point in eight years. In May, total crude imports stood at 33 million barrels, averaging 7.8 million barrels per day. This is a considerable drop from the 11.6 million barrels per day imported on average last year. Fuel exports have also been curtailed, as the government prioritizes domestic supply of diesel and gasoline, even at inflated prices.

Refining Operations Scale Back

The reduced demand for refined products and the complexities of global supply have led to a notable decrease in refinery operations. Average refinery run rates have fallen to 66.3%. Over the course of May, the total volume of crude processed decreased by 9.1% year-on-year, reaching 53.72 million tons. This represents the lowest average refinery utilization rate observed in the past four years, reflecting the subdued domestic demand and shifts in the global energy landscape.

Market Ripple Effects

This dramatic slowdown in China's gasoline car market and its implications for fuel demand have significant knock-on effects across several interconnected markets. The reduced appetite for crude oil, particularly from China, can influence global benchmark prices. Furthermore, the accelerated adoption of electric vehicles suggests a growing demand for battery components and the raw materials essential for their production, such as lithium and cobalt.

The weakening demand for gasoline vehicles also directly impacts the automakers themselves, potentially leading to shifts in manufacturing strategies and investment priorities. Companies heavily reliant on ICE technology face significant headwinds, while those with strong NEV portfolios are better positioned to capitalize on evolving consumer preferences. This bifurcation creates opportunities for investors and strategic players within the automotive and energy sectors.

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