China's car exports surged in 2026, but domestic demand slowed

HONG KONG (AP) — China’s auto exports surged 21% in 2025, driven by rising shipments of electric vehicles, as domestic demand continued to slow, an industry association said Wednesday.

As Chinese automakers expanded further into overseas markets, exports of new energy vehicles such as EVs and plug-in hybrids doubled from the previous year to 2.6 million units, according to the China Association of Automobile Manufacturers.

Overall vehicle exports from China passed 7 million units, up 21% from the previous year.

Chinese car exports are expected to continue to grow this year, as its automakers maneuver against an intensifying price war at home as demand weakened.

Sales of passenger cars in China, the world's biggest market for vehicles, further slowed in December, the association said. December sales fell 18% year-on-year, following a nearly 7% decline in November.

Deutsche Bank recently estimated that China’s passenger vehicle exports will increase 13% year-on-year in 2026. The bank's economists said in a recent report that overseas markets offer relatively higher profitability for Chinese automakers, on top of faster growth.

On Monday, China and the European Union said they had agreed on steps to resolve a standoff over exports of China-made electric vehicles to the bloc, a development that analysts say will likely fuel more Chinese EV exports to Europe.

Cui Dongshu, the general secretary of the China Passenger Car Association, another industry group, predicted that China’s EV exports to the EU would rise by an average of around 20% each year between 2026 and 2028.

Overseas markets currently contribute less than 10% of revenue for most Chinese automakers, though leading players like BYD see larger overseas revenue contributions, said Stephen Chan, an associate director at S&P Global Ratings. “We believe the (overseas) contribution will likely rise over the next two years as exports expand,” he said.

Key export destinations will likely remain Russia, Latin America, the Middle East, Europe and Southeast Asia, which together accounted for roughly 70% of 2025 volumes, he added. However, markets including the EU, the U.S. and Canada have placed elevated tariffs on Chinese EV exports.

Meanwhile, domestic demand remains sluggish.

BYD surpassed Tesla as the world’s biggest EV maker in 2025. However, in December, BYD reported just 420,398 deliveries for all types of vehicles, down 18% from a year earlier, as it faced weak domestic demand and rising competition from rivals.

Domestic have enjoyed help from government trade-in subsidies aiming to encourage more people to switch to EVs, but demand has slowed as some regional governments suspended or trimmed subsidies over the past few months, analysts said.

Domestic passenger car sales will likely drop further in 2026, said Paul Gong, head of China Autos Research for the Swiss bank UBS.

As government subsidies for new passenger cars are also changing this year from flat rates to a system based on new car prices, it is adding to pressure on sales of cheaper vehicles, according to analysts at S&P.

More than half of China’s new passenger vehicle sales come from cars priced below 150,000 yuan ($21,510), S&P said in a recent report.

“To secure sales, they (automakers) could target improving product features or subsiding consumers out of their own pockets,” its analysts wrote.