New Energy Auto Trend
According to data from the China Passenger Car Association (CPCA), China's economy withstood pressure and steadily moved forward in 2025, continuously focusing on "new" and "high-quality" products, demonstrating remarkable resilience.
Total retail sales of consumer goods exceeded 50 trillion yuan, a year-on-year increase of 3.7%, 0.2 percentage points faster than in 2024. China's scale firmly established itself among the top in the global retail sector, and consumption's role as a "ballast" for economic growth became increasingly evident.
Among these efforts, the trade-in program was a significant boost to consumption, with related sales exceeding 2.6 trillion yuan, benefiting over 360 million people and covering multiple sectors including automobiles, home appliances, and digital products, successfully revitalizing existing demand and unlocking new growth potential.
The automotive sector was a key focus of policy efforts. In 2025, over 11.5 million vehicles were traded in through the trade-in program. The State Council further expanded the scope of support, including gasoline-powered passenger vehicles meeting the National IV emission standard in the scrapping subsidy program.
Subsidies for new energy vehicles and gasoline vehicles reached a maximum of 20,000 yuan and 15,000 yuan respectively, significantly improving the policy's precision. Benefiting from this policy, the passenger vehicle market reached a new high in 2025, with total retail sales of 23.745 million passenger vehicles, of which 12.809 million were new energy vehicles, representing a year-on-year increase of 17.6% and a penetration rate of 53.9%, exceeding 50% for the first time, demonstrating significant achievements in industry transformation.
A new round of trade-in subsidies has been launched in 2026, and policy continuity provides stable support for the automotive market. However, the market is currently in a critical period of policy transition and adjustment. The core variable lies in the adjustment of the new energy vehicle purchase tax policy.
From January 1st, the full exemption policy was changed to a 50% reduction, increasing the cost per vehicle by several thousand yuan, directly triggering a negotiation between consumers and manufacturers at the beginning of the year.
Coupled with the fact that automakers launched a series of purchase tax relief and cash discount activities in December 2025 to meet annual targets, pre-emptively drawing up a large amount of demand, resulting in a demand vacuum in the market in January 2026.
Multiple short-term factors further exacerbate the market downturn. The persistent low temperatures in northern China during January highlighted the reduced range of new energy vehicles, exacerbating consumer range anxiety. Furthermore, the New Year's Day holiday reduced the number of days stores were open, decreasing customer traffic and sales opportunities.
Meanwhile, the proportion of first-time buyers increased before the holiday; this group is more price-sensitive, and the rise in purchase tax led to a wait-and-see attitude. Data from the China Passenger Car Association (CPCA) shows that from January 1st to 11th, national passenger car retail sales declined by 32% year-on-year and 42% month-on-month. Dealer traffic, orders, and deliveries all shrank, with some stores seeing orders at only 10%-20% of the same period last year.
To offset these fluctuations, automakers have launched diversified strategies, moving away from simple price wars and shifting towards value competition. SAIC Volkswagen and Dongfeng Honda, among others, combined trade-in subsidies and financial benefits.
BMW lowered the guide prices of 31 models, Tesla launched a 7-year ultra-low interest plan and paint reduction policy, and brands like Ledao further reduced purchase tax costs through battery leasing models, forming a differentiated promotional package.
However, market reaction remains cautious. The China Passenger Car Association (CPCA) predicts January retail sales of 1.8 million passenger vehicles, a 20.4% decrease month-on-month, with new energy vehicle sales reaching 800,000 units, a penetration rate falling to 44.4%, a temporary low.
Short-term fluctuations do not change the long-term trend. The market is currently transitioning from strong policy stimulus to product competitiveness and a more normalized consumption pace. As detailed rules for trade-in subsidies are gradually implemented in various regions and consumers adapt to policy changes, the market is expected to gradually recover.
