Shares ​of BYD sank to their lowest level in at least a year on Monday, leading a broader selloff in ‌Chinese automaker stocks, reports Reuters. This came after they reported weaker sales in January as a revised subsidy scheme weighed on budget car brands.

The selloff underscores growing investor concern that China’s carmakers are heading into a prolonged slowdown as demand softens at home and policy support becomes less generous. Shenzhen-based BYD’s Hong Kong-listed shares ended down 6.9% at HK$91, marking their biggest one-day percentage drop since May 26, 2025, ‍after hitting the lowest in about a year during the day.

“Investors were likely surprised by the large degree of the domestic decline which implies a sharp market share loss,” said Eugene Hsiao, head of China equity strategy at Macquarie Capital. “Overall, we do not expect to see a ‌meaningful turnaround in domestic demand until BYD launches new models with higher value for money compared to rising competitors in ​the space,” he added.

China’s factory activity faltered in January as weak domestic demand dragged down production at the start of the new ‍year, reports Reuters, citing an official survey by the purchasing managers’ index (PMI).

The PMI dropped to 49.3 in January, from 50.1 in December, below the 50-mark separating growth from contraction. Sub-indexes of new orders and new export orders also saw declines, respectively, down to 49.2 from 50.8 ⁠in December and 47.8 from 49.0 in December. 

The non-manufacturing PMI, which includes services and construction, dropped to 49.4 from 50.2 in December, falling to its lowest since December 2022.

China’s automobile sector posted record revenue of RMB 11.2 trillion ($1.6 trillion) in 2025, up 7.1% year-on-year, while profit growth failed to keep pace, sinking to a record monthly low of 1.8% in December 2025, dragging the full-year average to just 4.1%, reports Caixin. This is according to data released Tuesday by the China Passenger Car Association (CPCA), citing the National Bureau of Statistics.

Last year’s 4.1% profit margin fell below the 5.9% average across China’s industrial sector and extended a decline from the 2014 peak of 8.99%. December’s margin was the lowest in five years outside of major disruptions. The only worse month was April 2022, when strict Covid-19 lockdowns drove margins down to 0.7%.

Cui Dongshu, secretary-general of the CPCA, said government subsidies supporting vehicle trade-ins have boosted demand, but the industry’s productivity gains remain weak compared with other consumer sectors.New-energy vehicles (NEVs), which favor volume over immediate profit, are increasingly shaping market dynamics. NEV production jumped 25% to 16.52 million units in 2025, while output of internal combustion engine vehicles shrank 1% to 18.25 million.

China’s new energy vehicle (NEV) production jumped 25% to 16.52 million units in 2025, while output of internal combustion engine vehicles shrank 1% to 18.25 million. The as the automobile sector also posted record revenue of RMB 11.2 trillion ($1.6 trillion) in 2025, up 7.1% year-on-year, but profit margins were just 4.1%, well below the 5.9% average for China’s industrial sector. 

NEVs are now close to dominating the automobile sector, but gas guzzlers are still by a small margin outselling battery-power car. And the shrinking average profit margin for the sector is reflective of a fierce price war. It appears there are well over 100 domestic EV brands selling into the China market, and the small overall profit margin for the sector must mean that most of them are losing money or being heavily subsidized by local governments.

Car manufacturing is one of the key “new productive forces” that China is shifting its economy towards as a replacement for property market and other sectors in trouble. But such low profits suggest making sustainable is difficult.

Porsche AG’s sales in China slumped for the fourth straight year in 2025, dropping to 42,000 units—less than half the 96,000 vehicles the German luxury carmaker delivered at its 2022 peak, reports Caixin. The carmaker is struggling with what its China chief called a “perfect storm” of economic strain and intensified domestic competition.

Alexander Pollich, president and CEO of Porsche China, acknowledged the downtrend in a January 26 interview, citing a seismic shift in Chinese consumer preferences. Buyers increasingly demand advanced digital features, areas where domestic are outpacing foreign rivals.

The falloff highlights the mounting pressure on traditional Western luxury brands in the world’s largest car market. Chinese players, many with roots in the internet and smartphone industries, are rapidly redefining premium mobility with aggressive pricing and superior digital integration.