China's car market heads for worst year since 2021 as sales fall

China’s passenger car market is on track for its weakest year since 2021 after sales dropped sharply in the first half of 2026. The China Passenger Car Association now expects fullyear retail sales to fall 14%, after earlier projecting flat growth. The slowdown has been driven by weaker consumer demand, higher fuel costs, and reduced electric vehicle subsidies. Internal combustion engine sales fell steeply in June, while rising input costs and falling vehicle prices have also squeezed industry margins. Analysts say competition remains intense across China’s auto sector, especially among electric vehicle makers. Some expect the market to consolidate further over time, with larger companies better positioned to survive the pressure. Despite the weak domestic outlook, exports have been a bright spot. Chinese passenger vehicle shipments abroad rose sharply in June, and some analysts expect overseas demand for Chinesemade EVs to support the industry’s recovery next year.