BUSINESS

China Auto Sales Slump May Last Into Second Half of 2026

Published: Mar. 13, 2026 3:37 a.m. GMT+8

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Cui Dongshu

China’s auto market may not return to year-on-year growth until the second half of 2026, according to a leading industry association.

The gloomy forecast highlights mounting challenges in the world’s largest auto market, where demand is cooling because of reduced government trade-in subsidies, the expiration of a decade-long purchase tax exemption for new-energy vehicles and a regulatory push against excessive competition that has largely halted aggressive price cuts.

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China’s auto market may not see year-on-year growth until H2 2026; 2026 domestic sales are expected to decline, with exports keeping overall volume flat.
Retail auto sales dropped 18.9% year-on-year (Jan-Feb 2026), mainly due to reduced subsidies and the end of new-energy vehicle tax exemptions.
Regulators curbed price wars; carmakers now rely on financial promotions, with Tesla boosting sales via low/zero-interest loans.

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Who’s Who

Tesla Inc.: In January 2026, Tesla Inc. introduced seven-year low-interest or five-year zero-interest loan plans in China. This move led to a more than 40% year-on-year increase in its domestic retail sales, reaching 38,000 units in February. Tesla's seven-year loan plan offers an effective annual interest rate below 1%.

Nio Inc.: Li Bin, the founder and chairman of Nio Inc. (蔚来), expects China's passenger car market to contract slightly in 2026 and continue its decline into 2027. This suggests that the period of rapid growth for the sector has ended, aligning with a cautious outlook shared across the industry.

AI generated, for reference only