China EV Sales Drop 13 Percent in First Half 2026

China's electric vehicle market experienced a significant downturn in the first half of 2026, with sales dropping 13 percent to 4.73 million units. The Government of China contributed to this slump by phasing out sales-tax breaks and reducing vehicle tax subsidies, while a shaky domestic economy and consumer anticipation of future price cuts further dampened demand.

Industry overcapacity remains high because regional governments funded numerous local brands to protect jobs and tax revenue. Consequently, only a few manufacturers, including BYD, Xiaomi, and Leapmotor, remain profitable. Chery Automotive has emerged as the country's largest exporter of vehicles as firms seek to offset domestic losses.

This aggressive export push has created a trade deficit with the European Union exceeding $1 billion per day. In response to the imbalance, officials from both the European Union and China intend to develop a joint plan by October to address the market volatility.