With subsidies suspended in a wide range of regions, light vehicle (LV) sales in China recorded negative growth in December. Total volumes reached approximately 2.5 million units, representing a year-on-year (YoY) decline of 16%. The passenger vehicle (PV) segment, which fell 17% year-on-year to 2.2 million units, remained the main driver, while the light commercial vehicle (LCV) segment recorded a modest 1% year-on-year increase to 240,000 units. For the full year 2025, low-voltage vehicles still delivered strong performance, with total volumes reaching 26.9 million units, a year-on-year increase of 6%. Similarly, by segment, both PV and light commercial vehicles each grew 6% year-on-year. The seasonally adjusted annualized sales rate (SAAR) for December was 24.2 million units, down 15% from the same period in 2024.
Source: GlobalData
During the month, China’s BT production amounted to 3.1 million units (-3.5% year-on-year). Photovoltaic production, which accounted for 90% of the total, fell 4.1% year-on-year to 2.9 million units, but still points to sustained consumer demand and market resilience. In contrast, CV production increased by 2.5% year-on-year to 291,000 units. Chinese domestic OEMs recorded their first drop in production, falling 0.4% year-on-year to 2.3 million units, while joint venture OEMs remained under pressure, with production falling 11.1% year-on-year. On the other hand, exports were a clear positive point. During the month, China shipped 684,000 LVs, representing strong growth of 47.5% YoY and 3.0% MoM (MoM), mainly driven by PV, as overseas deliveries increased 48.1% YoY to 633,000 units. CV exports also strengthened, increasing 42.4% year-on-year to 72,000 units. For the full year 2025, total light vehicle exports reached 6.6 million units, a year-on-year expansion of 19.4%.
Overall, China’s auto market slowed markedly in December, with momentum quickly cooling (effectively a “rapid freeze”) as a combination of factors affected demand. The usual surge in year-end sales, known as the “tail effect,” did not materialize, probably because many consumers brought forward their purchases in line with the “Golden September and Silver October” sales season and to take advantage of regional “trade-in” subsidies. As such, sales between January and October increased 7% year-over-year, well above typical levels of recent years. Additionally, starting in November, subsidy budgets were depleted in many regions, leading to application suspensions that reduced the expected policy-driven increase and softened replacement demand. To add to the doubts, starting in 2026, the tax on the purchase of new energy vehicles (NEV) will go from a total exemption to a 50% reduction; However, implementation details have been delayed, leading many consumers to postpone their purchases and further widening the end-of-year demand gap.
Therefore, the December slowdown reflected the combined effects of declining political support, consumer hesitancy, ongoing industry transformation (particularly the shift from gasoline-powered vehicles to new energy vehicles), and pressures on inventories. This suggests that the market is entering a new phase of adjustment and deeper restructuring, moving beyond the era of rapid growth.
Looking ahead to 2025, China’s automotive industry has made solid progress in scale, structural optimization, technological innovation and market standardization, indicating a shift toward a new phase of high-quality development. Both BT’s production and sales reached record levels. NEV sales exceeded 13 million units, up 20% year-on-year, becoming the main growth force in the market. To address “devolution-style” competition, regulators introduced a series of measures during the year, including measures to curb disorderly price wars, encouraging automakers to honor payment term commitments, running targeted campaigns to address online disorder, and issuing guidelines on price compliance practices, all aimed at maintaining healthy competitive conditions. At the same time, the regulatory and safety framework continued to improve. The Ministry of Industry and Information Technology made the “no fire, no explosion” requirement mandatory for electric batteries, standardized hidden door handles, and put electric-only photovoltaics under export license management. Supervision of used car exports was also strengthened to support the sustainable development of the industry.
In 2026, China’s automobile market will likely enter a crucial stage, moving from “scale competition” to “capacity competition.” From a policy perspective, adjustments to the NEV purchase tax, an updated trade-in subsidy program, and a stricter dual credit policy will directly impact consumers’ vehicle purchasing costs and automakers’ strategic priorities. Overall, the policy direction is shifting from broad-based stimulus to more targeted support, an approach that should prove more sustainable in the long term. Two characteristics stand out. First, linking subsidies to new vehicle prices should help prevent the previous practice of “profiteering” through low-price models and ensure that fiscal resources are more precisely directed to improving consumer demand. Second, earlier clarification of policy details should stabilize consumer expectations and reduce irrational spikes in last-minute purchases seen in previous years ahead of subsidy deadlines. Based on current conditions, we expect the domestic market in 2026 to register slight growth or remain stable compared to 2025, while exports should maintain double-digit expansion. NEVs, overseas markets and downstream markets will continue to be the key pillars of growth. At the same time, industry transformation is likely to accelerate further, intensifying consolidation and accelerating the “survival of the fittest” cycle.
Source: GlobalData
“Policy changes and sales fluctuations continue to impact China market” was originally created and published by Just Auto, a brand owned by GlobalData.
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