China’s electric car boom has hit a softer patch with January’s numbers suggesting the slowdown is no longer confined to the margins. BYD, the country’s dominant electric vehicle maker, reported its weakest monthly domestic performance in nearly two years.
This notable downturn coincides with deeper concerns about demand, policy fatigue and a market crowded with rivals chasing the same buyers.
The Shenzhen-based group sold 205,518 vehicles in January, including plug-in hybrids, of which only 83,249 were battery-electric passenger cars.
That was the lowest monthly tally since February 2024, a period when Covid disruptions were still echoing through supply chains.
Typically, January figures in China are always awkward to read, with the Lunar New Year following a farming calendar - rather than the Western one – which shifts each year and distorts production, sales and logistics.
However, this time there was an extra headwind.
From January 1, Beijing reinstated a 5% purchase tax on so-called new energy vehicles - aka cars powered by batteries or a mix of battery and petrol - after an exemption had been in place for more than a decade.
While electric cars were one of the few clean growth stories within an economy working through a long property slump, by mid-2024, more than half of new passenger cars sold in China were new energy models.
In 2025, BYD overtook Tesla to become the world’s largest seller of battery-electric cars, delivering 2.26 million units, up almost 28 per cent on the year before.
However, that momentum appears to be on shaky ground.
No fewer than six major brands, including Xiaomi and Xpeng, reported sharp drops in January from December.
Some companies report deliveries rather than sales, and many do not split domestic from overseas numbers, which blurs comparisons.
Nevertheless, the direction is hard to miss, with consultants claiming that policy uncertainty is feeding caution.
Consumers are delaying big-ticket purchases, while manufacturers are slowing new launches.
Meanwhile, the market is wrestling with overcapacity, with too many factories now chasing too few buyers.
This has resulted in an extended price war that’s forcing carmakers to add features while cutting margins.
Competition is no longer coming from the fringes.
Geely has climbed into second place behind BYD, selling more than 270,000 vehicles in January across its Galaxy and Zeekr electric brands and exports.
The privately-owned Chinese automotive conglomerate expects new energy vehicle sales of 2.22 million units in 2026, up 32% year on year.
Other challengers are also pressing, with Aito - which uses Huawei’s operating system in its cars - delivering more than 40,000 vehicles in January, up more than 80 per cent from a year earlier.
Leapmotor and Nio posted deliveries of 32,059 and 27,182, respectively.
Xiaomi’s electric car push continues to gather pace, with more than 39,000 deliveries in January, though that was down from December’s peak ahead of an upgrade to its SU7 sedan.
Meantime, BYD is leaning harder on overseas markets to offset the squeeze at home.
Exports fell to 100,482 vehicles in January from 133,172 in December, but the company has flagged plans to lift overseas sales by nearly a quarter this year to 1.3 million cars.
It has yet to set a domestic sales target.
The broader industry slowdown carries weight beyond showrooms.
New energy vehicle sales grew just 2.6% year on year in December, the third straight month of decelerating growth.
Autos support about 30 million jobs, more than one-tenth of China’s urban employment.
While the sector’s share of fixed asset investment is modest compared with property, a deeper slide would test confidence at a sensitive moment.
Beijing is watching closely with China’s top leaders due to outline economic priorities at the annual parliamentary meeting in March.
If electric cars falter alongside housing, the pressure to revive subsidies is expected to grow.
