China’s EV sales drop 13% in first half of 2026, tax breaks axed from 2027

China’s electric-vehicle market contracted sharply in the first half of 2026, with battery-electric and plug-in hybrid sales falling 13% year-on-year to 4.73 million units. June alone saw 1.04 million new-energy passenger cars registered, a 7% decline versus June 2025.

The downturn coincides with Beijing’s decision to phase out a small annual vehicle-tax break for battery-electric, plug-in hybrid, range-extender hybrid and fuel-cell commercial vehicles starting 1 January 2027; the cuts save buyers between 360 yuan ($53) and 660 yuan ($97) per year. Only three domestic EV makers—BYD, Xiaomi and Leapmotor—are currently profitable, while AlixPartners estimates only four more brands may break even by 2030.

With domestic demand soft and subsidies shrinking, Chinese automakers are accelerating exports; analysts project around 10 million vehicles shipped overseas in 2026, a 41% jump from 2025. The broader slowdown has already pushed some weaker firms toward collapse or acquisition.