China Auto Market Boomed in 2025: Why Growth May Be Softer in 2026

Core Insights - China's vehicle sales and production reached record highs in 2025, with production at 34.5 million units (up 10.4% year over year) and sales at 34.4 million units (up 9.4% year over year), driven by strong demand for new energy vehicles (NEVs) [2][4] Group 1: Market Performance - In 2025, China's passenger vehicle market also crossed the 30-million-unit mark, with production at 30.27 million units (up 10.2% year over year) and sales at 30.10 million units (up 9.2% year over year) [3] - The commercial vehicle segment saw production and sales rise to 4.26 million and 4.30 million units, both achieving double-digit growth [3] - China maintained its position as the world's largest auto market for the 17th consecutive year [4] Group 2: NEVs and Export Growth - China remained the largest NEV market globally for the 11th consecutive year in 2025, with NEV production and sales surpassing 16 million units [5] - NEV sales increased by 28% year over year to 16.5 million units, with battery electric vehicles (BEVs) leading the growth at 10.6 million units (up 37.6%) and plug-in hybrid vehicles (PHEVs) reaching 5.8 million units (up 14%) [6] - Vehicle exports reached a record 7.1 million units, up 21% year over year, driven by improved product quality and competitive pricing [7] Group 3: Key Players - BYD led in volume with approximately 4.6 million vehicles delivered in 2025, marking a 7.7% year-over-year increase [9] - NIO delivered 326,028 vehicles, up nearly 47% year over year, while XPeng recorded the fastest growth with deliveries jumping 126% to 429,445 units [10] - Li Auto delivered 406,343 vehicles, reflecting a 19% year-over-year decrease, despite expanding its international presence [11] Group 4: Future Outlook - Growth in China's auto market is expected to moderate in 2026, with total vehicle sales forecasted to increase by just 1% to 34.8 million units, compared to a 9% rise in 2025 [17] - Passenger vehicle sales are projected to rise 0.5% to 30.3 million units, while commercial vehicle sales are expected to increase by 5% to 4.5 million units [18] - NEVs are anticipated to remain the main growth driver, with sales forecasted to rise 15% to 19 million units, albeit at a slower pace than in recent years [18]