China’s Car Sales Stumble After Eight Months of Growth: EV Sales Also Saw a Drop

China’s auto market experienced an unexpected downturn in October, ending an eight-month streak of growth. Weakening consumer sentiment, partly due to reduced tax exemptions and government subsidies, contributed to the slowdown.

Passenger car sales edged down 0.8% to 2.27 million units in October, compared with a 6.6% rise in September, according to data from the China Passenger Car Association (CPCA) released Monday.

Electric Vehicle Growth Slows

Sales of electric vehicles (EVs) and plug-in hybrids (PHEVs) also lost momentum, rising just 7.3% in October, a slowdown from September’s 15.5% gain. These figures fell short of CPCA’s preliminary projections, which had anticipated 6% overall sales growth and a 17% increase in new energy vehicle (NEV) sales.

Tax Breaks and Subsidies Fade

The slowdown comes as government incentives that helped drive demand begin to fade. Purchase tax breaks of up to 30,000 yuan ($4,211) for EVs and PHEVs are set to halve in 2026. In response, automakers such as Xiaomi, Nio, and Li Auto have introduced their own incentives, offering up to 15,000 yuan to encourage pre-orders for next year.

Meanwhile, subsidies that fueled more than 12 million auto trade-ins this year are winding down as the program nears its end. Nearly 20 provinces and cities have either suspended or tightened subsidised trade-in schemes, reducing consumer buying activity.

Rising Competition in China’s Auto Sector

Soft demand is intensifying competition in the world’s largest auto market. EV leader BYD reported another month of declining sales, while Geely and Leapmotor posted record numbers, challenging BYD in the budget segment.

One emerging competitor is the Aion UT super EV, which offers a 500-km (311-mile) range and CATL’s battery-swapping technology, starting at a competitive 49,900 yuan, positioning it against BYD’s entry-level Dolphin model.

Also Read: Car Sales October 2025: Maruti Suzuki, Tata Motors Posted Double-Digit Growth

Exports Boost Market Outlook

Despite sluggish domestic demand, Chinese automakers are increasingly looking overseas. Strong exports from BYD and others helped China’s auto export growth accelerate to 27.7% in October, up from 20.7% in September, according to CPCA data.

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