China’s electric vehicle market showed clear signs of strain at the start of the year, with January sales highlighting weaker domestic demand and intensifying competition.
BYD, the country’s largest electric carmaker, recorded its lowest monthly electric passenger car sales in nearly two years, adding to concerns about how quickly China’s EV growth is slowing.
Sales lose momentum after strong run
BYD sold 83,249 battery electric passenger cars in January, out of total vehicle sales of 205,518 units, including plug-in hybrids.
That marked the weakest monthly battery electric performance since February 2024, when the company sold 121,748 vehicles.
Exports also cooled, slipping to 100,482 vehicles from 133,172 in December.
The slowdown followed a period of rapid expansion.
BYD last year sold 4.56 million new energy vehicles, and in the previous year, overtook Tesla to become the world’s largest seller of battery-powered electric cars, delivering 2.26 million units, nearly 28% more than a year earlier.
By the middle of 2024, new energy vehicles accounted for more than half of all new passenger car sales in China.
Policy shift weighs on demand
January also marked a turning point for government support.
From Jan. 1, China reinstated a 5% purchase tax on new energy vehicles, ending an exemption from the full 10% vehicle purchase tax that had been in place for over a decade.
The timing complicates the interpretation of the data, as economic and business figures early in the year are often volatile due to the Lunar New Year falling on different dates.
Still, analysts warn that policy changes could lead consumers to delay purchases, while automakers become more selective about launching new models.
Competition intensifies across brands
BYD’s softer January performance came amid a crowded and increasingly aggressive market.
Several rivals, however, posted strong year-on-year gains.
Aito, whose vehicles use Huawei’s operating system, delivered more than 40,000 vehicles in January, up over 80% from a year earlier.
Leapmotor and Nio also reported year-on-year increases, delivering 32,059 and 27,182 vehicles, respectively.
Smartphone maker Xiaomi recorded more than 39,000 electric car deliveries in January, higher than a year earlier but down from over 50,000 in December, ahead of a planned upgrade to its SU7 sedan in April.
Xpeng reported 20,011 deliveries last month, well below its 2025 monthly average of more than 35,000 vehicles. Li Auto deliveries also declined to 27,668 units.
Pressure on BYD has also increased from Geely, which has moved into second place in China’s electric car market.
In January, Geely sold more than 270,000 vehicles, including its Galaxy and Zeekr electric brands and exported models, with overseas shipments exceeding 60,000 units.
Geely expects its overall new energy vehicle sales to rise to 2.22 million cars in 2026, representing 32% year-on-year growth.
BYD has not issued a full-year domestic sales target. Instead, it said late last month that it plans to increase overseas sales by nearly 25% this year to 1.3 million vehicles.
Broader economic stakes
The January slowdown reflects a wider cooling trend. New energy vehicle sales grew just 2.6% year on year in December, marking a third consecutive month of decelerating growth, according to China Passenger Car Association data.
That moderation matters for an economy already under pressure from a prolonged downturn in real estate, once responsible for around a quarter of gross domestic product.
While the autos sector supports about 30 million jobs, more than one-tenth of urban employment, its role in future investment is smaller.
Fitch Ratings estimates autos accounted for 3.7% of fixed asset investment last year, compared with 23% for real estate.
China’s top leaders are expected to outline economic and policy priorities at an annual parliamentary meeting in March.
