ICE Vehicles Face a Historic Shift as China’s EV Market Accelerates and VW Repositions
China's passenger car market delivered a stark verdict in May 2026: internal combustion engine (ICE) vehicles lost 39% of their sales volume year-on-year, with market share collapsing to a historic low of 37.1% — a data point that lends empirical weight to a now-viral analogy from one of Europe's most senior auto executives.
Martin Sander, Volkswagen AG's board member responsible for sales, marketing, and aftersales, told interviewers this month that the transition from combustion to electric vehicles may prove more organic — and more complete — than the industry currently models. "Today's ICE cars are yesterday's horse-drawn carriages," Sander said, adding a pointed qualifier: "And nobody ever banned the horse carriage. People simply stopped using it." The comment, framed as a consumer-choice argument rather than a regulatory one, signals a strategic reorientation at Wolfsburg: stop defending combustion, and start selling the electric value proposition.
China's Price-Band Data Reveals Where ICE Is Losing — and Where It Stubbornly Holds
The most granular evidence of the structural shift comes from China Passenger Car Association (CPCA) data for May 2026, which breaks down powertrain mix across seven retail price segments. The picture is unambiguous at the entry level and nuanced at the premium end.
In the sub-RMB 50,000 (sub-US$6,944) segment, battery electric vehicles (BEVs) command a 91.5% share. In the RMB 50,000–100,000 (US$6,944–13,889) band, BEVs hold 64.7%. In the RMB 100,000–150,000 (US$13,889–20,833) segment, the contest tightens: ICE leads at 38.2%.
The RMB 200,000–300,000 (US$27,778–41,667) segment shows BEV dominance reasserting itself at 54.4%, with ICE at 24.7% and extended-range EVs (EREVs) at 10.4%. The sole remaining ICE stronghold sits in the RMB 300,000–400,000 (US$41,667–55,556) and above-RMB 400,000 (above US$55,556) tiers, where combustion engines, PHEVs, and BEVs rank first, second, and third respectively.
Critically, CPCA data shows BEV posted the largest year-on-year share gains in five of the seven price segments — a momentum indicator that no powertrain rival matched.
Sander's "Horse Carriage" Thesis Reframes the Policy Debate
Sander's analogy carries a deliberate strategic message directed as much at regulators as at consumers. He argued that the industry has wasted intellectual bandwidth debating ICE ban deadlines, a framing that alienates consumers still satisfied with gasoline vehicles. Instead, he advocated redirecting resources toward charging infrastructure density, lower electricity costs, and communicating tangible EV benefits — quieter cabins, lower maintenance costs, and superior low-speed torque.
His forecast: by 2035, the share of buyers actively preferring ICE vehicles could shrink to 3%–5%. Combustion engines, he suggested, would survive as a niche — "the way horse-drawn carriages still exist for leisure and hobbyists" — rather than disappear entirely.
The forecast aligns with a broader Volkswagen product cadence. For Europe, the company is preparing to launch the ID. Polo (the electric derivative of its best-selling Polo subcompact), a substantially revised ID.3, an ID. Polo GTI, and the ID. Tiguan, all slated for 2026. For China, Volkswagen's showroom strategy pivots toward larger SUV formats calibrated to local competitive dynamics — a market where domestic challengers have forced foreign OEMs to compress margins and accelerate localization.
Sander was explicit about the knowledge transfer: "Everything we learn in China will help us stay globally competitive. It comes down to scale, efficiency, and cost."
Chinese Influencer Data Adds a 2029 Countdown
The executive's macro forecast finds a retail-level echo in commentary from Han Lu, one of China's most-followed automotive social media analysts. Writing on his platforms this week, Han argued that by 2029, 80%–90% of new car sales in China would be pure electric — with PHEVs and EREVs retreating almost entirely to off-road and long-distance expedition use cases.
Han's timeline is aggressive: he contends 2026–2027 represents the final window for consumers to purchase conventional (non-off-road) PHEV and EREV models before those powertrains begin disappearing from mainstream sedan, SUV, and MPV lineups. From 2028, he expects a sharp contraction in PHEV availability for ordinary passenger vehicles.
The structural logic underpinning both forecasts is converging: battery pack costs have fallen to levels that allow BEV sticker prices to compress into mass-market segments; fast-charging infrastructure has materially reduced range anxiety; and rising fuel prices — Chinese retail gasoline prices have re-entered the RMB 7-per-liter range — are nudging previously hesitant buyers toward recalculating total cost of ownership.
European Rivals Accelerating, But Headwinds Remain Real
Volkswagen is not moving alone. BMW AG is preparing a new-generation i3 sedan with a claimed 559-mile (900-km) range on a full charge and a 10-minute top-up delivering 249 miles (401 km) of additional range. Mercedes-Benz AG's CLA EV has exceeded its EPA-rated range in independent testing, achieving 385 miles (620 km) on a single charge — a result that addresses one of the most persistent consumer objections in Western markets.
Yet the global picture remains uneven. In the United States, reduced federal EV subsidies have produced a measurable sales decline in 2026. The European Union has softened its zero-emission mandate into a broader "emissions reduction" framework, creating regulatory headroom for PHEVs and EREVs — a policy shift that partially validates Sander's argument that mandates can backfire by generating consumer resistance.
China's January–May 2026 new energy vehicle (NEV) cumulative sales reached 5.802 million units, up 3.5% year-on-year. Of that total, domestic deliveries accounted for 3.97 million units and exports for 1.833 million units — a ratio that underscores China's dual role as the world's largest NEV consumption market and its most prolific export base.
In Europe, BEVs represented 20.9% of new vehicle registrations in January–April 2026, according to the European Automobile Manufacturers' Association (ACEA) — a threshold that, if sustained, would mark the first full calendar year in which pure electrics consistently exceed the one-in-five benchmark.
Investment Implication: The Mid-Market Is the Decisive Battleground
For investors tracking OEM equity and battery supply chains, the CPCA segment data identifies the RMB 100,000–200,000 (US$13,889–27,778) corridor as the critical contested zone. ICE and BEV are statistically tied in this band, and PHEV is a meaningful third force. Whichever powertrain wins decisive share here over the next 24 months will determine whether the 2029 scenarios sketched by Han Lu and the 2035 projections offered by Sander prove conservative or overstated.
The horse carriage, notably, did not disappear in a single regulatory decree. It was priced out, outperformed, and eventually rendered culturally marginal — a process that unfolded over roughly two decades. On the current trajectory of Chinese BEV penetration data, the combustion engine may not have that long.
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