China’s auto market is entering a softer phase as demand weakens and global uncertainty continues to weigh on both domestic sales and exports, according to the China Association of Automobile Manufacturers (CAAM). The association estimates overall vehicle sales will rise by just 1% in 2026, a sharp slowdown from 9.4% growth in 2025, which points to a market that is still expanding but doing so at a far more cautious pace than last year’s rebound.
EV Growth and Export Momentum Start to Cool
Electrified vehicle growth is also cooling. CAAM projects sales of electric vehicles and plug-in hybrids will increase 15.2%, down from 28.2% in 2025, as adoption moves from rapid acceleration into steadier, more measured gains. Exports, which helped carry the sector through 2025, are also losing momentum, with outbound shipments expected to rise 4.3% in 2026 after a stronger-than-anticipated 21.1% jump in 2025. CAAM linked the weaker export outlook to trade tensions and geopolitical uncertainty, which continue to complicate market access and pricing for Chinese manufacturers abroad.
Domestic Demand Weakness and Inventory Pressure
At home, the pressure comes from the consumer side. CAAM said residents face an unstable income outlook and job insecurity concerns, which limits appetite for big-ticket purchases even as automakers keep competing aggressively on price. That competition, however, may create another short-term problem: inventory. The association warned that tighter scrutiny of so-called “zero-mileage used cars” could intensify stock pressure in the domestic market. Under this practice, automakers register new vehicles and sell them as second-hand units at steep discounts to clear stock and hit sales targets, but regulators are now watching the tactic more closely and CAAM expects tighter rules to bite in the near term.
Trade Tensions and Localisation Add New Export Headwinds
Beyond China’s borders, CAAM sees more headwinds building. Trade disputes could intensify and push down demand in key markets, while Chinese automakers increasingly shift toward overseas localisation to reduce tariff and political risk. That strategy may strengthen long-term market presence, but it also reduces the number of vehicles shipped directly from China, adding another constraint to export growth in 2026.
