Retail sales of light passenger vehicles in China, including sedans, MPVs, and SUVs, declined by a further 23% year-on-year to 1.51 million units in May 2026, after rising by 14% to 1.94 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 7.5% to 950,000 units last month, with battery electric vehicle (BEV) sales rising by 4% to 637,000 units, while sales of plug-in hybrid vehicles (PHEVs) fell by 23% to 228,000 units and sales of extended-range electric vehicles (EREVs) plunged by 28% to 85,000 units. Retail sales of internal combustion engine (ICE) passenger vehicles fell by 39% to 560,000 units.

Vehicle exports continued to grow strongly last month, rising by 69% to 930,000 units, driven by a 112% surge in overseas shipments of NEVs to 424,000 units.

See also: Chinese domestic demand hit by subsidy tightening as output anchored by export surge

After growing strongly in the first nine months of last year, China’s domestic light passenger vehicle market has declined sharply this year, following the withdrawal of some government subsidies and tax exemptions for new energy vehicles (NEVs). China’s economy 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 despite the import tariff hikes by the US last year. 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.

In the first five months of 2026, the domestic light passenger vehicle market declined by almost 20% to 7.099 million units from 8.817 million units in the same period last year, with all major segments falling sharply, including NEV sales which declined by 15% year-on-year. 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 driving up domestic consumption, but has reduced its NEV purchase tax incentive from a full exemption to a 50% discount. GlobalData forecasts a 4% decline in light vehicle sales to 25.7 million units in 2026, down from 26.9 million units in 2025, with the outlook deteriorating due to the conflict in the Middle East, followed by a further 1% decline to 25.4 million units in 2027.