China Auto Sales Plunge, Exports Surge, Mideast Risk Looms

Domestic sales plunged 34% to 950,000 vehicles, primarily due to fewer business days from Lunar New Year holidays, the expiration of EV tax breaks, and reduced government subsidies. This weakness is further evidenced by a 26% decline in domestic sales for the combined January-February period.

The domestic market for electric and plug-in hybrid cars saw a significant 30% drop in the first two months, a stark contrast to the 17.7% gain in 2025. Automakers are also contending with a brutal price war and elevated inventories, which reached 3.57 million unsold cars by January's end, up from 580,000 a year prior. Conversely, exports surged an impressive 58% to 590,000 vehicles in February, helping to offset domestic declines.

Over January and February, exports climbed 54%. However, this positive trend faces a significant headwind from the U.S.-Israeli war on Iran, as the Middle East accounted for approximately one-fifth of China's vehicle exports last year.

Industry officials express concern that March export data may reflect this geopolitical instability, clouding the outlook for a crucial growth driver.