(Aug 11): China’s car exports surged again, serving as a lifeline for automakers mired in a domestic slump driven by rising fuel costs and weak consumer confidence.

Overseas shipments jumped 88% year-on-year in July to 918,000 units, according to China’s Passenger Car Association (PCA). That means that 41% of cars produced in the country were sent abroad, compared with 21% a year ago.

Robust exports contrast with the overall slump in total passenger vehicle retail sales, which dropped 21% to 1.46 million units in July. While that was led by a 41% decline in sales of internal combustion vehicles, new-energy vehicles, including both hybrids and battery-electric cars, fell 3.9%. NEVs accounted for a record 65% of sales, according to the PCA.

The divergence highlights a structural shift in the world’s largest auto market, where automakers are increasingly reliant on overseas expansion to bolster their bottom line. At home, a prolonged price war, higher costs and a rollback of purchase incentives have left carmakers struggling to entice buyers.

BYD Co was the biggest exporter of NEVs last month, shipping 173,721 vehicles — more than twice the volume of number two, Chery Automobile Co. BYD’s total sales rose 22% last month to around 420,000 units. Tesla Inc exported 66,330 vehicles from its Shanghai hub and sold 27,249 locally.

Meanwhile, Stellantis NV partner Zhejiang Leapmotor Technology Co saw monthly sales volume top 100,000. Driven by popular mass-market models like the A10, the startup reported 83,698 domestic retail sales, making it the third best-selling car brand in China.

Still, the PCA said that margins are being squeezed. China’s automotive industry recorded a 3.8% sales profit margin in the first half of the year, lagging behind the 6.5% average across upstream and downstream manufacturing.

High upstream raw material costs, prolonged vendor payment terms and persistent retail discounting continue to cap profitability, leaving carmakers dependent on sustained export growth to maintain operational scale, the association said.

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