China’s passenger‑car retail market contracted sharply in February, with sales of around 1.034 million units—a 25.4% year‑on‑year decline—continuing a weak start to 2026. Cumulative retail sales for January–February stood at 2.578 million vehicles, down 18.9% from the same period a year earlier, underscoring a pronounced short‑term shock after the Lunar New Year.
Cui Dongshu, secretary‑general of the China Passenger Car Association (CPCA), described the downturn as an expected, temporary fluctuation and predicted that the market would revert toward a more normal trajectory from March. He cautioned, however, that the steep fall in the first two months means achieving year‑on‑year growth for March will be difficult given the base effects.
The weakness was concentrated among domestic independent brands. In February, independent brands sold roughly 630,000 units—down 30% year‑on‑year—and their retail share fell to 61.2%, a drop of 4.3 percentage points. By contrast, mainstream joint‑ventures and luxury marques saw smaller declines: mainstream joint ventures fell 19% to about 270,000 units, and luxury brands declined 12% to about 130,000 units, with luxury share rising to 12.7%.
The manufacturer rankings nonetheless still showed pockets of strength among domestic makers. Geely led with about 145,000 retail units, BYD rose to second with roughly 89,000 units (overtaking FAW‑Volkswagen), and Changan climbed into fourth place. Part of BYD’s resilience reflects its quick rollout of long‑tenor, low‑interest financing offers alongside several other manufacturers.
A wave of seven‑year subprime‑rate financing packages has swept the industry since year‑end, with Tesla China first introducing a seven‑year ultra‑low‑interest plan and BYD and more than 20 other automakers following. Cui argued these programs are genuine consumer concessions aligned with Beijing’s broader consumption stimulus rather than destructive internal price competition.
New energy vehicles (NEVs) remain a mixed picture. NEV retail sales fell to about 464,000 units in February, down 32% year‑on‑year, while fuel‑burning passenger‑car retail sales were roughly 570,000 units, down 19%. Yet the market mix is shifting upward: entry‑level A00 cars suffered the steepest declines—A00 wholesale volumes dropped 61%—while B‑segment electric cars grew their share. NEV retail penetration rose from 38.6% in January to 44.9% in February, and CPCA expects penetration to top 50% after March as consumers adjust to recent tax and subsidy changes.
The clearest bright spot was exports. In February China exported 555,000 passenger cars (including CKD shipments), up 56% year‑on‑year, with NEVs accounting for 48.5% of exports—an increase of 15 percentage points. Daily export volumes reached a historical high, signaling strong overseas demand and the growing global competitiveness of Chinese auto makers even as domestic consumption falters.