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(Bloomberg) — Electric vehicles and plug-in hybrids likely surpassed 50% of all vehicles sales in China for the first time in July, even as the overall number of cars sold fell, marking a key milestone in the country’s auto market.

Sales of electric vehicles and plug-in hybrids, which are counted under the category of new energy vehicles in China, rose to 879,000 units, making up 50.8% of total sales. New vehicle sales dropped 2% to 1.73 million in July, according to preliminary figures released Wednesday by the China Passenger Car Association.

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The milestone shows that the EV industry continues to enjoy strong momentum in China even as demand slows in the rest of the world. Wang Chuanfu, the CEO of the world’s largest EV and hybrid manufacturer BYD Co., had predicted China reaching Wednesday’s milestone at an event in March, when EV and hybrid deliveries on a weekly basis were close to or surpassed 50% of all sales. He also added the industry was entering the elimination stage of the race.

The fall in July’s overall car sales was mainly due to a drop-off in the second half of the month as some automakers idled production for their annual summer break. Sales also fell off after some manufacturers reduced discounts as an industry price war abated, the association wrote in a post on its Wechat account. 

The slide is part of a larger indication that spending on autos remains weak in China. Car-related spending in the first half of 2024 was down about 1.1% from a year earlier. The state economic planner and financial ministry last month unveiled additional funding to boost consumption, including doubling subsidies for trading old cars for new ones to 20,000 yuan ($2,800).

While competition on prices continues, there are signs some carmakers are looking to reduce their discounts. Some BMW dealers have raised prices, prompting Audi and Mercedes-Benz to consider following suit, local media reported. BYD meanwhile continued to slash prices, cutting prices of the Leopard 5 model under its premium Fang Cheng Bao brand by up to 17.2%.  

Beijing also relaxed the requirements for getting auto loans and continues to run campaigns to promote EVs in smaller cities and rural areas, hoping to find new drivers of growth. 

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