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China’s once‑booming electric vehicle (EV) market continued to struggle in early 2026, with domestic sales figures showing a pronounced slowdown and BYD Co., the nation’s leading EV maker, reporting its lowest delivery numbers in nearly two years.
Latest industry data showed electric vehicle deliveries in mainland China dropped sharply in January, marking broad challenges across the sector. According to analysts, market demand has weakened as government incentives are scaled back and production costs rise. Overall EV deliveries in January were down significantly compared with recent months, underscoring a sustained loss of momentum after years of rapid expansion.
Following this decline, sources noted heightened concerns about the country’s sluggish domestic demand and the oversupply of vehicles, triggering price wars and international trade tensions.
To demonstrate the intensity of the situation, reports confirmed that at least six leading electric vehicle (EV) brands, including Xiaomi and Xpeng, reported a significant downturn in sales in January following the December peak.
However, it is worth noting that authorities find it challenging to produce accurate economic reports because some firms report only delivery figures rather than sales figures. Moreover, reports highlighted a lack of transparency in reporting international sales figures.
Analysts spark concerns about the decline in automotive sales
In a statement, Helen Liu, a partner at Bain & Company, noted that “We see growing pressure on China’s auto market in 2026 due to a mix of policy changes and competition.” She also stated that “new policies might lead consumers to postpone buying cars while automakers may become more careful about launching new models.”
Reports indicated that January and February might show unpredictable economic data trends because the Lunar New Year holiday falls on a variable, agriculture-based calendar.
Apart from this finding, reports mentioned that EV buyers faced a major, unexpected drop in government subsidies this January. To support this claim, China released a statement on January 1, confirming the reintroduction of a 5% purchase tax on new energy vehicles, ending over a decade of full exemptions from the standard 10% levy. New energy vehicles (NEVs) encompass both battery-electric and hybrid models.
This announcement sparked tension in the automotive mobility ecosystem. In an attempt to calm these fears, Tu Le, founder and managing director of consulting firm Sino Auto Insights, weighed in on the situation. He stressed that they are aware EV sales will decline, but do not know to what extent, arguing that individuals should regain their composure as they await more clarity after the end of the first quarter.
Meanwhile, in response to this decline in sales, the Beijing government has adopted various measures to support its electric car industry. For example, it rolled out diverse, supportive policies and financial aid programs.
Regarding China’s sales report, sources noted that more than 50% of new passenger cars sold were new-energy vehicles by the summer of 2024. In 2025, BYD surpassed its US rival Tesla to solidify its position as a leader in battery-powered electric vehicle sales. At this time, the Shenzhen-based firm sold a total of 2.26 million units, reflecting an increase of 28% from the previous year.
Nonetheless, despite these impressive sales results, BYD sold only 83,249 battery-electric passenger cars out of the 205,518 vehicles available in January, marking their lowest monthly sales figure since February 2024, when they set a record of 121,748 car sales.
Automobile makers rush to boost their car features
BYD faces stiff local competition amid a price war that has forced automakers to cut prices while boosting features. For instance, Aito, a prominent Chinese premium electric vehicle (NEV) marque that struck a deep partnership with technology giant Huawei, delivered more than 40,000 vehicles in January, an increase of more than 80% compared to the previous year.
Another example is Leapmotor and Nio, which reported surges in deliveries to 32,059 and 27,182, respectively, compared with last year. Similarly, Xiaomi saw car deliveries rise to more than 39,000 in January year on year, ahead of the launch of the updated SU7 sedan in April. However, this was a drop from more than 50,000 deliveries made in December.
“BYD has done exceptionally well at the top, and it’s remarkable how long they’ve managed to stay ahead of their domestic competitors,” Le said, arguing that market competition is fierce among automakers.
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