China's electric vehicle market just hit a speed bump. BYD, the world's largest EV maker, posted its lowest monthly sales in nearly two years this January, while at least six major Chinese electric car brands saw sharp month-over-month declines, according to CNBC's analysis. The slowdown comes as Beijing pulled back crucial tax incentives that had fueled a decade of explosive growth, raising questions about whether the industry that's been propping up China's sluggish economy can maintain its momentum.
BYD just stumbled. The Chinese EV giant that's been steamrolling competitors for years reported its weakest monthly performance since early 2024, sending ripples through an industry that's become crucial to China's economic stability. The January sales figures aren't just a blip - they're a red flag for the world's largest auto market.
The numbers tell a brutal story. At least six major electric car brands from Xiaomi to Xpeng saw sharp sales drops between December and January, according to CNBC's analysis. BYD's exports tapered to 100,482 vehicles in January, down from 133,172 cars the previous month. It's a dramatic reversal for a company that sold 4.56 million new energy cars last year and seemed unstoppable.
The timing couldn't be worse. Starting Jan. 1, China reinstated a 5% purchase tax on electric vehicles after exempting new energy vehicles from the full 10% vehicle purchase tax for over a decade. That policy shift hit just as the crucial Lunar New Year shopping season was ramping up.
"We see increasing pressure on China's auto market in 2026, driven by a combination of policy and competitive factors," Helen Liu, partner at , told . She said policy changes could prompt consumers to delay car purchases while automakers become more cautious about new vehicle launches.
