China car spending drops as subsidies dry up

Spending on vehicles by Chinese consumers plunged 12.6% year-on-year in the first half of 2026, the sharpest drop among all consumer goods, reports Caixin. This comes as reduced government subsidies and imposition of a purchase tax on new-energy vehicles (NEVs) battered the market.

Data released Wednesday by the National Bureau of Statistics showed that consumer spending on vehicles fell to RMB 1.97 trillion ($290 billion) in the first six months of this year, with the sector’s share of total retail sales of consumer goods shrinking to 7.9% from around 10% in recent years. Domestic auto sales dropped 21.1% year-on-year to about 9.9 million units in the same period, according to data from the China Association of Automobile Manufacturers.

The contraction underscores the growing strain on the world’s largest auto market as Beijing pivots its policy focus from subsidizing car purchases to cultivating untapped automotive aftermarket.