China EV Tracker: Policy shift may accelerate industry consolidation

August demand stayed soft; inventory build picked up ahead of peak season. China passenger vehicle retail sales fell 24% y-o-y but improved 5% m-o-m to 1.54m units in August, still a low level overall. EV retail was more resilient at 1.0m units, down 10% y-o-y. On the supply side, August wholesale volumes jumped to 2.35m units, around 0.8m units above retail (whereas Jan-Jul was broadly below retail), suggesting the industry is building inventory ahead of the peak season. Early September data is still soft due to last year's high base, but we expect demand to improve from late September as new models launched around the Chengdu Auto Show start to contribute. The 15th five-year plan for auto, released on 11 Sep, shifts policy focus from volume expansion to high-quality growth. It targets 70% EV penetration for PV by 2030 and introduces capacity monitoring to drive consolidation and weed out inefficient capacity. Key priorities include breakthroughs in automotive chips, operating systems