China’s domestic auto market saw sales drop 14.8% from a year earlier in January, reports Caixin. This comes as the industry grappled with a shift in government support policies.
Total domestic sales fell to 1.665 million vehicles last month, down 33.9% from December, the China Association of Automobile Manufacturers (CAAM) said Wednesday. Domestic new-energy vehicle (NEV) sales dropped 18.9% from a year earlier to 643,000 units in January, a steeper decline than the 11.9% fall in gasoline-powered vehicle sales, which totaled 1.022 million units.
Two main factors drove the slump. Subsidies in 2025, which provided fixed-amount rebates and fueled rapid growth in affordable NEVs, are being replaced by subsidies tied to vehicle prices. At the same time, the government adjusted the purchase tax on NEV starting in 2026. After benefiting from a full exemption since September 2014, buyers are now required to pay a 5% tax, effectively raising acquisition costs.