Retail sales of light passenger vehicles in China, including sedans, MPVs, and SUVs, declined by 23% year-on-year to 1.602 million units in June 2026. The large drop is off a high base - they rose by 18% to 2.08 million units in the same month last year, according to data compiled by the China Passenger Car Association (CPCA).

Retail sales of new energy vehicles (NEVs) declined by over 9% to 1.007 million units last month, with a 3.6% increase in battery electric vehicle (BEV) sales to 657,000 units more than offset by a 27% fall in plug-in hybrid vehicle (PHEV) sales to 241,000 units and a 32% drop in sales of extended-range electric vehicles (EREVs) to 82,000 units. Retail sales of internal combustion engine (ICE) passenger vehicles plunged by 39% to 595,000 units.

China’s domestic light passenger vehicle market has declined sharply this year, with first-half sales falling by 20% to 8.701 million units after rising by 11% to 10.9 million units in the same period last year. All major segments declined, including NEV sales which fell by 14% to 4.714 million units following the withdrawal of some government subsidies and tax exemptions.

The country’s GDP expanded by a better-than-expected 5.0% year-on-year in the first quarter of 2026, after growth slowed to 4.5% in the previous quarter, driven mainly by strong exports. Consumer spending picked up slightly in the first quarter, helped by recent government stimulus measures, but growth remained sluggish at 2.4% year-on-year.

Passenger vehicle exports rose by 82% to 877,000 units in June, driven by a 152% surge in shipments of NEVs to 499,000 units, while in the first half of 2026 total passenger vehicle exports increased by 65% to 5.096 million units.

Earlier this year, the Chinese government confirmed that it will continue its vehicle trade-in subsidy programme until the end of 2026, as part of its broader policy of boosting domestic consumption, but has reduced its NEV purchase tax incentive from a full exemption to a 50% discount. GlobalData forecasts a 6% decline in light vehicle sales to 25.3 million units in 2026, down from 26.9 million units in 2025, with the outlook deteriorating due to the conflict in the Middle East.