Have Gasoline Cars Made a Comeback?

According to data from the China Association of Automobile Manufacturers, domestic sales of traditional fuel vehicles in August were 902,000 units, a year-on-year increase of 13.5%. This marks the third consecutive month of growth in fuel vehicle market sales.

Are gasoline vehicles really making a comeback?

Sales of fuel vehicles have stopped declining.

Over the past seven years, the status of fuel vehicles in the Chinese market has undergone a transformative change.

In 2017, fuel vehicles dominated the passenger car market with an overwhelming lead, selling over 24 million units and contributing 97% to the market. In contrast, the sales of new energy passenger vehicles were less than 600,000 units during the same period, with a penetration rate of less than 3%, and they had not yet formed a scale effect. At that time, electrification was more regarded as a long-term plan, and real competition had not yet arrived.

In the following years, fuel-powered vehicles continued to maintain a massive presence. Even by 2020, their annual sales remained around 19 million units, accounting for more than 90% of the market share.

In contrast, although new energy vehicles have been growing year by year, their scale remains relatively small, with annual sales hovering around one million units and a long-term penetration rate below 8%. At that time, consumers’ acceptance of electric vehicles was limited, with their main concerns focused on driving range, charging convenience, and residual value stability.

The turning point occurred in 2021. That year, sales of new energy passenger vehicles in China exceeded 3 million units, with the penetration rate entering double digits for the first time, thus ushering in the wave of electrification.

Since then, the domestic passenger car market landscape has undergone fundamental changes. From 2022 to 2024, new energy vehicle sales have maintained double-digit or even higher growth rates, with penetration steadily rising to nearly 50%. By last year, sales volume had exceeded 10 million units.

During the same period, sales of fuel vehicles continued to decline, with domestic sales in 2024 dropping to 11.55 million units, a year-on-year decrease of 17.3%, and market share falling to 51%. The view that fuel vehicles are "facing a decline" has been raised from time to time.

The root cause is due to multiple factors. In September 2020, the country explicitly proposed the goals of "carbon peak" by 2030 and "carbon neutrality" by 2060, aiming to reduce emissions by nearly 80% over 40 years. New energy vehicles have become a key focus of industrial policy support. Both central and local governments have continuously promoted policies such as purchase subsidies, vehicle purchase tax exemptions, and free license plates, creating unprecedented opportunities for the development of new energy vehicles. This has not only stimulated demand but also accelerated the maturation of the industrial chain, indirectly squeezing the survival space of fuel vehicles.

Secondly, the rapid iteration of new energy vehicle technology is an important driving force. Improvements in battery energy density, faster charging speeds, and breakthroughs in driving range have enabled new energy vehicles to overcome the early issue of "short legs."

For example, in the early years, the pure electric range of new energy vehicles was mostly less than 300 kilometers, and there were serious discrepancies in the advertised range. Nowadays, mainstream models generally have a range exceeding 500 kilometers, greatly enhancing their practicality and alleviating range anxiety. At the same time, the rapid expansion of charging infrastructure has improved the charging experience.

According to the latest data from the National Energy Administration, by the end of June 2025, the total number of electric vehicle charging facilities in China had reached 16.1 million, including 4.096 million public charging facilities and 12.004 million private charging facilities. The coverage rate of charging facilities in counties reached 97%, and in townships reached 80%.

In addition, the continued decline in prices of new energy products has further accelerated the market shift. The large-scale production of new energy vehicles has reduced costs; for example, the price of Chinese lithium battery packs has dropped to $94 per kilowatt-hour. Currently, some new energy vehicle models are priced below 100,000 yuan, directly competing with entry-level fuel vehicles. In contrast, fuel vehicles are increasingly losing their cost-performance advantage due to oil price fluctuations and stricter environmental standards.

With the continuous expansion of intelligent configurations, consumers are gradually shifting from traditional fuel vehicles to new energy vehicles. In particular, younger groups prefer electric vehicles with strong environmental and technological attributes. As a result, the sales of new energy vehicles have experienced explosive growth, and the penetration rate has achieved a significant leap in just a few years.

However, entering 2025, the domestic passenger car market landscape has undergone subtle changes, with the decline in fuel vehicles narrowing. Data shows that from January to August this year, domestic sales of fuel passenger vehicles reached 7.14 million units, achieving a slight year-on-year increase of 1.1%. This was mainly due to a significant rebound in sales in the third quarter, with fuel passenger vehicle sales in June, July, and August consecutively increasing year-on-year by 9.7%, 9.5%, and 13.5%.

This means that fuel-powered passenger cars still show a certain degree of market resilience after years of decline.

Short-term fluctuations of "trading volume for price"

The recovery of the fuel passenger vehicle market is largely a short-term fluctuation. From the perspective of sales structure, the growth is mainly due to the concentrated efforts of joint venture car manufacturers. Currently, the penetration rate of new energy vehicles among joint brands is generally below 10%, and they still primarily rely on fuel vehicles.

In the past two years, new energy vehicles have aggressively expanded their market share through price cuts and superior configurations, putting significant pressure on joint venture car companies. The market share of joint venture car companies has dropped from 64% in 2020 to 39% in 2024, with annual sales shrinking from 12.4 million units to 9.04 million units last year.

In order to maintain the foundation of fuel vehicles, joint venture brands have significantly accelerated their counterattack pace in the first half of 2025, not only updating and upgrading their products but also stimulating demand through pricing concessions and financial policy support.

In terms of pricing, mainstream joint venture brands are increasing current terminal discounts while enhancing the core technical competitiveness of new products and simultaneously adjusting pricing strategies in order to better compete with domestic brands. For example, FAW-Volkswagen launched the new Sagitar L with a starting price approximately 20,000 yuan lower than the old model, at just 114,900 yuan. When the new Tayron X was launched, its price was 30,000 yuan lower than the pre-sale price, and it was marketed under the slogan "direct sales price."

The strategy of "exchanging price for volume" has yielded immediate results in the short term. For example, after a maximum discount of 60,000 yuan on the Buick Envision Plus from SAIC-GM, its sales in the first half of this year increased by 200% year-on-year, with monthly sales once exceeding 20,000 units. Toyota has also benefited from the "fixed price" strategy, with sales in China increasing by 9.9% year-on-year to 940,000 units in the first seven months.

At the same time, to ensure the stability of the market, automakers such as Volkswagen and Toyota are also striving to enhance the intelligence level of gasoline vehicles through their "Intelligent Hybrid" strategy.

The IQ.Pilot driver assistance system, co-developed by FAW-Volkswagen and Zoryu Technology, has been specially optimized for the characteristics of fuel vehicles, addressing engineering challenges such as engine control precision and cooling system adaptation. This allows fuel vehicles to gradually approach the level of electric vehicles in terms of intelligent experience. The new Sagitar L is currently the only model in its class of fuel vehicles equipped with end-to-end high-speed NOA functionality. The new Talagon also features the IQ.Pilot enhanced driver assistance system.

The newly launched Audi A5L has a starting price of 239,800 yuan. It is the first model built on Audi's all-new PPC luxury intelligent fuel platform and features upgraded intelligent functions. This vehicle is the first luxury fuel car equipped with Huawei's Qian Kun intelligent driving technology, including dual LiDAR, six millimeter-wave radars, 13 cameras, and 12 ultrasonic radars, enabling advanced driving assistance functions in both urban and highway scenarios.

The increased discounts at terminals, the convergence of pricing among independent brands, and the enhancement of intelligent capabilities have significantly boosted the competitiveness of joint venture brands in the fuel vehicle market. Leading companies among German and Japanese brands have become the main force driving sales, contributing to the overall recovery of market share for fuel vehicles.

Sales of several leading joint venture brands have rebounded. FAW-Volkswagen's sales in August increased by 4.2% year-on-year to 136,000 units; FAW-Toyota's monthly sales exceeded 70,000 units, with an 11% increase for the first eight months; SAIC-General's sales in the first eight months rose by 29.2% to 331,000 units; GAC-Toyota's August sales were 66,000 units, a year-on-year increase of 4.8%; SAIC-Volkswagen's cumulative sales in the first eight months were 658,000 units, with a decline narrowing to 3%, holding a 4.4% share of the passenger car market.

More specifically, in the July 2025 top 10 fuel vehicle sales ranking, joint venture car companies occupy seven spots. In the sedan sales rankings, traditional fuel sedans such as the Sylphy, Lavida, Sagitar, and Passat still perform strongly, with cumulative sales from January to July all exceeding 100,000 units.

Among them, the price range of 100,000 to 150,000 yuan is the most important support zone for fuel vehicles. In the first eight months of this year, sales of fuel vehicles in this segment reached 2.78 million units, accounting for one-third of the overall sales of traditional fuel vehicles.

Obviously, even though new energy vehicles are making aggressive inroads in the mid-to-high-end market, fuel vehicles still maintain a stable consumer base in this popular price segment. In particular, households with essential needs still have a strong reliance on the range stability, refueling convenience, and resale value of vehicles, which has become the main battleground for joint venture car companies to defend.

The stereotype that "intelligence can only belong to new energy vehicles" is gradually being broken, allowing fuel vehicles to regain technological competitiveness in the minds of consumers. Through "exchanging price for volume" and intelligent upgrades, joint venture brands have currently ushered in a brief "breather."

Unable to resist the tide of electrification

In fact, this rebound of fuel vehicles is more like a temporary recovery driven by defensive counterattacks. Although the counteroffensive by joint-venture car companies has stabilized the basic market share of fuel vehicles in the short term, it is difficult to change the overall market trend, which is increasingly shifting toward electrification. As new energy vehicles continue to ramp up in terms of price and technology, the pressure on fuel vehicles cannot be fundamentally alleviated.

From the current market landscape, the core territory of fuel vehicles is being rapidly encroached upon by new energy vehicles. From January to August this year, sales of fuel vehicles in the domestic passenger car market declined to varying degrees across three major segments: A00, A, and C. Particularly in the A-segment, the mainstream market, sales dropped by 3.8% year-on-year to 5.03 million units. Only the A0 and B segments saw slight increases in sales, driven by greater terminal discounts and trade-in incentives. Even with some sales rebound in the third quarter, fuel vehicles still cannot compete with the double-digit growth rate of new energy vehicles.

In contrast, sales of new energy products have increased to varying degrees across all levels of segmented markets. The growth mainly comes from the A-level and B-level segments, with combined sales reaching 5.03 million units in the first eight months, representing a double-digit growth rate.

Among them, models like BYD Seagull and Geely Galaxy E5 represent the trend of new energy vehicles penetrating the mainstream market and are major contributors to the growth. In the first seven months of this year, BYD Qin L's cumulative sales reached 159,000 units, matching those of Nissan Sylphy. Geely Galaxy E5, which was launched just a year ago, has already achieved sales of 90,000 units during the same period.

For consumers, the choice of buying a car is no longer about whether electric vehicles can replace gasoline cars, but rather the reality that electric vehicles offer better value for money within the same budget.

Behind the shift in market share, policy guidance is the most important driving force. Under the "30·60" dual carbon goals, the automotive industry must accelerate decarbonization. Various regions have successively introduced measures such as purchase restrictions, driving restrictions, and preferential policies for new energy vehicle license plates, giving new energy vehicles a natural advantage in the purchasing process, while traditional fuel vehicles face increasingly stringent emission requirements and usage restrictions. Under the influence of such institutional forces, the trend toward electrification is almost irreversible.

Changes in consumer preferences cannot be ignored either. More and more young users view cars as smart terminals, emphasizing the sense of technology, connectivity experience, and environmental responsibility, which are the inherent advantages of new energy vehicles. In comparison, although fuel vehicles still have advantages in stability and long-term maintenance, their appeal in the minds of users has significantly decreased.

The deeper reason lies in the divergence of technological paths. The improvement in energy density of power batteries and the scaling of manufacturing are steadily reducing the costs of new energy products. Meanwhile, the continuous implementation of 800V/900V high-voltage platforms, ultra-fast charging networks, and hybrid technologies systematically alleviates concerns about range and charging.

Image source: FAW-Volkswagen

More importantly, there is a natural compatibility between electrification platforms and intelligent technologies. Technologies such as centralized electronic and electrical architectures, high-performance computing chips, and sensor fusion not only provide fundamental support for assisted driving and intelligent cockpits, but also form deep integration with emerging fields such as artificial intelligence, vehicle-to-everything (V2X) collaboration, flying cars, and embodied intelligence. This versatility and scalability further reinforce the positioning of electric vehicles as the "next-generation intelligent terminal," injecting strong momentum into their continuous iteration and market expansion.

Under this context, although fuel vehicles have temporarily stabilized their sales through "trading price for volume" and configuration upgrades, they still cannot avoid their structural shortcomings—namely, the generational gap with electric platforms in terms of intelligent response speed, data closed-loop capability, and energy utilization efficiency.

As industry insiders have pointed out, the real constraint on the intelligence of fuel vehicles is not a single technology, but their distributed electronic and electrical architecture, which is difficult to support high-bandwidth data transmission and whole-vehicle OTA upgrades. Even though some automakers have broken through engineering bottlenecks through collaborative research and development, the development cycle is long, costs are high, and the overall experience is still hard to compare with native electric platforms.

Therefore, the recent rebound in sales of fuel vehicles should be understood as a successful response of the traditional manufacturing system and market strategies under the pressure of transformation, rather than a reversal of the competitive landscape. The balance of the route dispute has firmly tilted towards electrification.

What is the future of internal combustion engines?

So, what exactly is the future of the internal combustion engine?

From the current trend, traditional pure internal combustion engine vehicles are gradually exiting the stage of history. Since 2025, a series of classic models such as the Nissan GT-R, Ford Focus, Mazda 6, and Mercedes-Benz A-Class have successively announced the end of production, as if enacting a “Twilight of the Gods.” Behind this are the practical pressures of stringent emission standards and declining sales, as well as automakers’ proactive strategic shift toward electrification. However, this does not signify the end of internal combustion engine technology.

There is a growing consensus in the industry that pure internal combustion engines will gradually disappear, but internal combustion engines will be reborn within new technological systems.

Guo Shougang, Deputy Director of the Ministry of Industry and Information Technology, has clearly stated, "While vigorously developing new energy vehicles, we must also simultaneously advance internal combustion engine technology." This policy direction indicates that although fuel vehicles face development pressure, internal combustion engine technology will continue to make progress and receive policy support. In other words, internal combustion engines will remain a part of automobile power systems in the future, working together with electric drive systems to support the industry's transformation.

According to the "High-Quality Development Plan for the Internal Combustion Engine Industry (2021-2035)," by 2035, the target for the effective thermal efficiency of gasoline internal combustion engines in passenger vehicles will reach 55%-57%, which is significantly higher than the current level. Currently, the actual thermal efficiency of mainstream automakers' internal combustion engines has reached 42%-43%.

Professor Han Zhiyu from Tongji University Automotive College predicts that "by 2030, 60% of new cars in the Chinese market will still require internal combustion engines." Pure electric vehicles will only account for 40% of the market share, while plug-in hybrids and hybrid products with internal combustion engines will together hold 60% of the market share.

Image source: FAW-Volkswagen

From the perspective of technological development trends, hybrid power is becoming the main form for the continuation of internal combustion engines. Since the internal combustion engine in a hybrid system does not need to cover all operating conditions independently, its operating range is greatly reduced and torque demand is lowered, allowing the engine structure to be significantly simplified. At the same time, internal combustion engines optimized specifically for hybrid systems can always operate within high-efficiency zones, resulting in a substantial improvement in thermal efficiency.

The widespread adoption of technologies such as Toyota's THS, Honda's i-MMD, BYD's DM, and Great Wall's DHT allows internal combustion engines to work in tandem with electric motors in hybrid systems, avoiding energy waste in inefficient conditions and significantly reducing overall fuel consumption levels.

Since 2024, the market share of hybrids in the 100,000 to 200,000 yuan range has increased by nearly 10 percentage points, becoming a compromise choice for consumers seeking low fuel consumption and reliable range.

In the long run, the core of the internal combustion engine’s revitalization and improvement in thermal efficiency lies in the transformation of fuels. In the face of increasingly stringent emission regulations and carbon neutrality requirements, internal combustion engines are shifting from reliance on petroleum fuels to carbon fuels such as methanol, hydrogen, and synthetic fuels. Han Zhiyu stated that green hydrogen and methanol are ideal fuels for carbon neutrality, and switching internal combustion engines to these fuels can significantly reduce emissions. This transformation not only addresses emission issues but also brings about a change in internal combustion engine design concepts.

Chinese enterprises have made substantial breakthroughs in this field. The clean energy engine developed by Geely Laboratory boasts a thermal efficiency of up to 48.15% and is compatible with both gasoline and methanol dual fuels, allowing it to start normally even in extreme environments as low as -40°C. This technology, named "Thunder God Alcohol Hydrogen EF," is set to go into mass production in the fourth quarter of 2025 and will be applied to new sedan and SUV models, with fuel costs as low as 0.2 yuan per kilometer.

BYD has, for the first time, equipped its Yangwang U7 PHEV version with a self-developed horizontally opposed engine, introducing innovations in lubrication and cooling structures to ensure a balance of high performance and low fuel consumption. Dongfeng Group has also made breakthroughs in hydrogen internal combustion engine technology, with its ammonia-diesel internal combustion engine achieving a thermal efficiency of 48% and gradually entering the stage of commercial demonstration.

From a global perspective, the continued development of internal combustion engines aligns with current trends. Currently, several multinational automakers such as Mercedes-Benz and BMW are slowing down their electrification transitions while restarting research and development of internal combustion engine technology. Audi CEO Markus Duesmann has stated that Audi will no longer set a definitive timeline for ending internal combustion engine production. Mercedes-Benz Chairman Ola Källenius also expressed that the company has decided to extend the sales period of internal combustion engine vehicles.

From this perspective, the view that "fuel vehicles and electric vehicles are not simply a replacement for one another" is no longer just a hollow statement. For a long time, pure electric vehicles and internal combustion engines are likely to coexist and complement each other.

For automotive companies, in the current period of industry transformation, it is necessary to adopt pragmatic and flexible market strategies. On one hand, stabilize the foundation of fuel vehicles through measures such as "intelligent integration of fuel and electric", price optimization, and financial policies to ensure cash flow and profits. On the other hand, accelerate the transition to electrification by promoting the research and application of hybrid technology and clean fuel internal combustion engines. Ultimately, achieve the goal of zero carbon emissions.