China's electrified vehicle sales slid 13% in the first half of 2026, as economic headwinds and shrinking government subsidies weigh on demand.
The slump is pushing local automakers to accelerate exports, a shift that will ripple through global markets.
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According to early data from the China Passenger Car Association, 1.04 million battery-electric and plug-in hybrid cars were sold nationwide in June.
That figure is 7% lower than the same month last year. First-half sales totaled 4.73 million units, down 13% from 2025.
Several factors are dragging on demand.
The Chinese economy remains shaky, many shoppers are waiting for price cuts, and government support for new energy vehicles (NEVs) keeps shrinking.
Tax Breaks to Be Cut
Beijing adjusted its subsidy policy earlier this year and began phasing out a sales tax break for EV makers.
Earlier this month, it confirmed that annual vehicle tax breaks for battery-electric, plug-in, range-extender hybrids, and fuel-cell commercial vehicles will be cut from January 1, 2027.
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These tax breaks are small, typically saving buyers between 360 yuan ($53) and 660 yuan ($97) per year.
But their removal adds to the cost burden for consumers.
Only three Chinese EV manufacturers are currently profitable: BYD, Xiaomi, and Leapmotor.
According to AlixPartners, as few as four others may reach break-even by 2030, while many weaker firms are expected to collapse or be acquired.
With profitability increasingly difficult at home, Chinese brands are focusing more on overseas markets.
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Analysts believe Chinese brands could end 2026 having exported roughly 10 million vehicles, a 41% jump from the previous year.
