China’s domestic auto sales plunged 23.1% year-on-year in the first two months of 2026 as reduced government stimulus and sweeping policy changes dampened consumer demand, reports Caixin.
Overall domestic auto sales fell to 2.8 million vehicles in January and February, according to data released by the China Association of Automobile Manufacturers (CAAM). Domestic deliveries of new energy vehicles (NEVs) tumbled 27.5% to 1.1 million units, while traditional internal combustion engine vehicle sales dropped 19.8% to 1.7 million. Including exports, China’s total vehicle sales declined 8.8% year on year to 4.2 million units.
CAAM attributed the domestic sluggishness to a combination of factors, including stimulus policy adjustments, front‑loaded demand, the Spring Festival holiday, weak consumer sentiment and a high base effect from the same period in 2024. Most crucially, a long‑standing vehicle purchase tax exemption for NEVs was halved at the start of 2026. The change, which now requires NEV buyers to pay a 5% tax compared with the 10% rate for gasoline cars, prompted many consumers to bring forward purchases to late 2025.