中 Suspicious 車 Domestic Market Conditions, Sales-Shares Fall Together

*This content was translated by AI.

Signs are being detected that China's electric vehicle industry is entering a classic recession where sales and stock prices are falling at the same time. The cause is the simultaneous saturation of the Chinese domestic market, intensifying competition, and changes in government support policies, raising concerns about slowing growth. According to a number of recent media outlets, investor sentiment in Chinese electric vehicle manufacturers has cooled sharply as of February 2026, and January sales performance of major brands, including industry leader BYD, has plummeted to half of the previous month, sending shockwaves through the market.

One of the direct causes of this sharp drop in sales is the Chinese government's reduction of purchase subsidies and changes in tax benefits. Since January 1, 2026, the Chinese government has ended the 10% vehicle purchase tax exemption that had been applied to purchasing existing electric vehicles and revived the 5% tax rate, and as a result, sales fell to the lowest level in two years in January this year as the year-end demand, which had been concentrated at the end of the year, was withdrawn.

Looking at the company's performance, BYD sold only 83,249 electric cars in January, the lowest number since February 2024, down sharply from the same period last year and the previous month. XPeng was also on the decline, with its stock price plunging 6.8% on the Hong Kong stock market, while Li Auto's sales in January remained at 27,668 units, down 37.5% from the previous month, continuing its decline for eight consecutive months. At least six major brands, including Nio and Xiaomi, suffered a sharp drop in sales compared to December, revealing disproportionate demand across the industry.

Competition within the market has intensified, intensifying the price war between low-cost brands, which has led to worsening profitability for companies and is reflected in stock prices. BYD's stock has lost more than 30% from its peak over the past year, significantly evaporating its market cap, and other major EV stocks are also showing overall weakness. While the growth of the domestic market is not as good as before, the pessimistic outlook is prevailing that the sluggish performance may be prolonged due to external uncertainties.

On the other hand, some brands have recorded relative performance and are signaling a market reorganization. Aito, which is equipped with Huawei's operating system, has achieved an 80% increase in sales compared to the previous year, and Geely Motor Company has sold more than 270,000 units in January alone, solidifying its second place in the market. However, experts predict that policy changes and intensifying competition will put significant pressure on the Chinese auto market as a whole in 2026.

As a result, it is analyzed that the Chinese electric vehicle market has passed an explosive period of growth and entered a restructuring stage due to saturation of domestic demand. Companies with connected car technology and software competitiveness are looking for some breakthroughs, but there is widespread caution that the market trend after the first quarter should be watched to recover overall investor sentiment and rebound sales.

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*This content was translated by AI.