BUSINESS

China Auto Sales Plunge 23% as Policy Changes Cool Demand

Published: Mar. 12, 2026 2:29 a.m. GMT+8

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Visitors attend an auto show in Fuzhou, Fujian province, May 30, 2025. Photo: VCG

China’s domestic auto sales plunged 23.1% year on year in the first two months of 2026 as reduced government stimulus and sweeping policy changes chilled consumer demand.

Overall domestic auto sales fell to 2.8 million vehicles in January and February, according to data released Wednesday by the China Association of Automobile Manufacturers (CAAM). Domestic deliveries of new energy vehicles (NEVs) tumbled 27.5% to 1.1 million units, while traditional internal combustion engine vehicle sales dropped 19.8% to 1.7 million. Including exports, China’s total vehicle sales declined 8.8% year on year to 4.2 million units.

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China’s domestic auto sales fell 23.1% year-on-year to 2.8 million units in Jan-Feb 2026, with NEV sales down 27.5% and gasoline cars down 19.8%.
Key factors include reduced government subsidies, revised NEV tax policy, and trade-in program cuts, causing NEV penetration to drop to 41.2%.
Exports surged 48.4% to 1.4 million vehicles, with overseas NEV shipments more than doubling to 583,000 units.

AI generated, for reference only

Who’s Who

BYD Co. Ltd.: BYD Co. Ltd., a solely NEV producer, saw its sales decline by 35.8% to 400,000 units in the first two months of 2026, falling to fourth place domestically. Despite this, BYD was the second-largest exporter among Chinese automakers, shipping 201,000 units overseas during the same period.

SAIC Motor Corp. Ltd.: SAIC Motor Corp. Ltd. rose to become China's top-selling automaker in the first two months of 2026. The company sold 581,000 vehicles, marking a 6.8% increase. This achievement places them ahead of BYD Co. Ltd., which had previously held the national sales crown.

Geely Automobile Holdings Ltd.: Geely Automobile Holdings Ltd. ranked second in China for domestic vehicle sales in January and February 2026, selling 545,000 units. Additionally, Geely was the third-largest exporter of vehicles from China during the same period, with 188,000 units shipped overseas.

FAW Group Corp.: FAW Group Corp. ranks among China's leading automakers. In the first two months of 2026, it sold 435,000 units, placing it third in domestic sales. This performance occurred amidst a significant downturn in the Chinese auto market due to policy changes and reduced government stimulus.

Chery Automobile Co. Ltd.: Chery Automobile Co. Ltd. led Chinese automakers in exports during January and February 2026, shipping 243,000 units. This performance highlights its strong focus on international markets amid a downturn in domestic sales.

Counterpoint: Counterpoint is a market research firm. Kevin Li, who leads automotive research at Counterpoint, expects overseas competition to be exceptionally fierce in 2026, aligning with industry views on the growing importance of exports for China's auto industry.

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What Happened When

2024 and 2025：: BYD Co. Ltd. held the national sales crown in these years.

2025：: Consumers received a flat 20,000 yuan subsidy for trading in an old vehicle for a new NEV, boosting sales of entry-level electric cars.

For all of 2025：: NEV penetration rate was 47.9%.

Late 2025：: Many consumers brought forward NEV purchases to take advantage of the then-current tax exemption before the 2026 policy change.

At the start of 2026：: A long-standing vehicle purchase tax exemption for NEVs was halved; NEV buyers now pay 5% tax instead of 0% previously.

2026：: Revision of the vehicle trade-in program: subsidy changed to 12% of vehicle's price, capped at 20,000 yuan, making subsidy for a 50,000 yuan car just 6,000 yuan.

January 2026 and February 2026：: China's domestic auto sales fell to 2.8 million vehicles, with NEV sales dropping 27.5% to 1.1 million and internal combustion engine vehicle sales dropping 19.8% to 1.7 million.

January 2026 and February 2026：: Including exports, China's total vehicle sales declined 8.8% year-on-year to 4.2 million units.

January 2026 and February 2026：: Automaker exports surged 48.4% year-on-year to 1.4 million units; NEV exports more than doubled to 583,000; Chery led with 243,000, followed by BYD (201,000) and Geely (188,000).

First two months of 2026：: Sales of micro NEV passenger cars collapsed 69.9% to 45,000 units; NEV penetration rate fell to 41.2%.

First two months of 2026：: BYD sales slid 35.8% to 400,000 units, dropping to fourth place; SAIC Motor took top spot (581,000 vehicles), followed by Geely (545,000) and FAW (435,000).

Wednesday, March 11, 2026：: The China Association of Automobile Manufacturers (CAAM) released sales data for the first two months of 2026.

Wednesday, March 11, 2026：: CAAM deputy secretary-general Chen Shihua said domestic headwinds may persist for another month or two before gradual recovery.

AI generated, for reference only