Car sales in China fell at the fastest pace in two years in January.
China's car market has suffered its sharpest contraction in two years, with domestic sales falling 19.5% year-on-year to 1.4 million units, reflecting increased competition, reduced subsidies, weakening consumer demand and increased regulation, according to Nikkei.
Sales of new energy vehicles (NEV), which had previously been the main engine of growth, fell even further, by 22.9%. Although there is often instability at the beginning of the year due to the change in the date of the Chinese New Year, this year's drop highlights a deeper structural weakness, which is compounded by reduced incentives under the revised used-car-for-new exchange policy, which provided more than 11.5 million subsidized purchases in 2025.
BYD, the leading electric car manufacturer, has experienced a 30% drop in sales, worse than the industry average, as automakers extend loan terms to eight years to attract cost-conscious buyers amid a downturn in the housing market and weak employment. Regulatory pressure is also increasing, with new safety regulations for electric vehicles, including a ban from 2027 on concealed door handles, which Tesla popularized.