China’s EV sales continue to slow down as BYD’s sales approach the lowest level in two years

BEIJING — China’s electric car giant BYD reported in January that domestic sales fell to the lowest level in nearly two years, suggesting growing challenges for the world’s largest auto market.

The recession comes amid growing concerns that China’s domestic demand is sluggish and its overproduction of cars will be leaked to other countries.

At least six major electric vehicle brands xiaomi to Spen According to a CNBC analysis, sales in January were significantly lower than in December. Some companies only report deliveries, not sales, and do not break out international numbers.

“A combination of policy and competitive factors will put even more pressure on China’s auto market in 2026,” said Helen Liu, partner at Bain & Company. He said policy changes could cause consumers to delay car purchases while automakers may be more cautious about launching new cars.

Because the Spring Festival holiday, which follows the agricultural calendar, falls on a different date each year, China’s economic statistics tend to be unstable in the first two months of the year.

However, in January this year, government support for electric vehicles was also significantly reduced. China has completely exempted new energy vehicles from the 10% vehicle purchase tax for more than a decade, but reinstated the 5% purchase tax from January 1. New energy vehicles include battery vehicles and hybrid vehicles.

“We know (EV sales) will slow down, but we don’t know how much it will slow down,” said Tu Le, founder and managing director of consulting firm Sino Auto Insights. “We’ll know better after the first quarter.”

Automakers also face increased competition from local rivals amid price wars that push them to offer more features at lower prices.

Ait, who owns cars equipped with smartphones and telecommunications giant Huawei’s operating system, reported deliveries of more than 40,000 vehicles in January, an increase of more than 80% from a year earlier.

leap motor and Nioh The number of vehicles delivered also increased from the previous year to 32,059 and 27,182, respectively.

Smartphone company Xiaomi’s electric vehicle deliveries rose to more than 39,000 in January compared to a year earlier, ahead of its planned upgrade to the SU7 sedan in April. However, that was down from more than 50,000 deliveries in December.

“BYD has had a stellar performance at the top, and it’s impressive how long it has managed to keep its domestic competitors at bay,” Le said, noting that not just one but multiple automakers are competing for the same market.

“Companies like Geely with the Galaxy EV are really capturing the low-end sales that butter BYD’s bread,” he added.

Geely has risen to second place in China’s electric vehicle market after BYD. In January, Geely Automobile sold more than 270,000 cars and export vehicles, including its electric car brands Galaxy and G-Car, compared to more than 60,000 cars last month.

The company predicts that overall sales of new energy vehicles will reach 2.22 million units in 2026, an increase of 32% from the previous year.

BYD, which sold 4.56 million new energy vehicles last year, has not yet announced its full-year domestic sales target. Instead, the company just told reporters late last month that it plans to increase overseas sales by nearly 25% this year to 1.3 million units.

The company’s exports also decreased to 100,482 units in January from 133,172 units in December.

Despite recent headwinds, Le expects BYD to maintain its dominance in domestic and international markets, citing the company’s plans to upgrade its charging, energy storage and intelligent driving infrastructure.

Xpeng reported that after a year of delivering an average of more than 35,000 cars per month, deliveries in January were just 20,011. Li Auto’s delivery volume last month also decreased to 27,668 units.

The sales slowdown is widespread across the industry. Sales of new energy vehicles, including hybrid and battery-powered vehicles, rose 2.6% year-on-year in December, the third straight month of slowing growth, according to data from the China Passenger Vehicle Association.

It’s a worrying sign for the electric vehicle industry, which has been a bright spot in an economy struggling to overcome years of decline in real estate, which once drove about a quarter of gross domestic product.

“If the auto sector deteriorates further on top of the prolonged real estate downturn, many in the industry expect the Chinese government to reinstate some or all of the subsidies. We will have to wait and see how the first quarter plays out,” said Cameron Johnson, a Shanghai-based senior partner at consulting firm Tidalwave Solutions, citing conversations with auto parts makers last week.

The head of China’s machinery association reportedly said in November that the auto sector contributes to about 30 million jobs in China, or more than a tenth of urban jobs.

However, Fitch Ratings economist Alex Muscatelli said the automotive sector’s economic share remains relatively small compared to real estate. He said real estate accounted for 23% of fixed asset investments, which indicate future growth, compared to 3.7% for cars last year.

Chinese leaders are expected to announce this year’s policy goals at their annual parliamentary meeting in March.