As the New Year’s bells rang, 2026 officially began. After a year of fierce competition and profound restructuring, the automotive industry is now turning a new page at a new historical juncture.
This year, the market experienced fluctuations driven by both policy support and rational consumer behavior. New energy vehicle penetration reached a milestone of 60%, and domestic brands achieved a market share exceeding 70%. These two forces intertwined to form the core of the industry’s transformation.
The rational correction of price wars and the comprehensive rise of quality competition signify that the industry has completely bid farewell to its period of unchecked growth and entered a phase of elimination where the strong get stronger.
As the dawn of 2026 illuminates the automotive market, stable market expectations and the clear themes of electrification, intelligentization, and globalization foreshadow a new journey focused more on value. What will the automotive market look like in 2026?
In 2026, domestic auto retail sales are projected to decline by 7%, while exports are expected to grow by 10%, resulting in an overall decline of 4.5%. This forecast is not a pessimistic signal, but rather an inevitable adjustment in the industry as it shifts from scale expansion to quality and efficiency improvement, and a rational move forward for the Chinese auto industry during its transformation period.
Let’s look at some basic data: In 2025, China’s total automobile sales reached 34 million units, including 7 million exported and 27 million domestically sold.
Based on this, it is estimated that in 2026, domestic retail sales will drop to 25.11 million units, while exports will increase to 7.7 million units, bringing the total to approximately 32.81 million units, a year-on-year decline of 4.5%. This prediction stems from a shift in policy direction, objective changes in market supply and demand, and also reveals the underlying logic of a soft landing for the industry.
The 7% decline in domestic retail sales is primarily the result of three combined factors. First, the dual impact of reliance on subsidies and policy shifts.
Since 2000, local subsidies and trade-in programs have continuously boosted the car market. In 2025, trade-in programs will cover 11.2 million vehicles, creating a “subsidy dependence” in the consumer market.
The recently concluded Central Economic Work Conference clearly stated that the development tone has shifted from “seeking progress while maintaining stability, and promoting stability through progress” to “seeking progress while maintaining stability, and improving quality and efficiency.”
While national and local subsidies will continue, their (intensity/strength) is likely to be less than that of 2025. The policy of halving the purchase tax will also be gradually phased out. After losing strong policy stimulus, consumer demand will return to rationality.
Second, the dual pressure of a high base and rising costs. Annual sales of 34 million vehicles are nearing the market ceiling, creating a “dammed lake” of high sales volume.
Meanwhile, rising raw material prices are pushing up component costs, making it difficult for automakers to boost sales through price wars.
The terminal data for the last three months of 2025 already provides a signal: a 0.5% decline in October, an 8.1% decline in November, and a continued decline in December. The 7% decline is actually a healthy adjustment to avoid a hard landing.
Third, the direct impact of the tightening policy on zero-kilometer used cars.
In the past, zero-kilometer used cars were registered domestically and then exported, included in domestic retail data but damaging brand value.
In 2026, the government will strictly control the export of new cars under the guise of used cars. While this will lower the domestic retail scale, it will force the industry to pay attention to its export reputation, and in the long run, the benefits outweigh the drawbacks.
Let’s look at the 10% export growth.
Three years ago, Europe had a €15 billion trade surplus with China in automobile exports; however, by 2025, Sino-European automobile trade has reversed, with Europe experiencing a €2.3 billion trade deficit with China.
As a result, European countries will inevitably formulate more aggressive import control policies. Japanese automakers in the Thai market are also beginning to band together to exert pressure, demanding adjustments to new energy vehicle support policies. Chinese automobile exports will enter a direct confrontation with multinational automakers.
Therefore, the uncertainties surrounding Chinese automobile exports have increased, and a 10% growth is a rational prediction.
Some might ask, is a decline in sales necessarily a bad thing? On the contrary, the overall adjustment of 4.5% represents a proactive cooling and rational shift in the industry.
In the past, we pursued scale above all else; now we value quality and efficiency more. In the past, we relied on policy stimulus; now we focus on technological innovation and brand upgrading. In the past, we relied on individual efforts in the domestic market; now, overseas markets have become a crucial support.
The adjustments in the automobile market in 2026 require proactive planning.
It is foreseeable that companies relying on policy dividends and lacking core technologies will likely be eliminated. For consumers, this brief market fluctuation will lead to higher-quality and more valuable products. For the Chinese automotive industry, this period of adjustment will usher in a stronger industrial cluster, accelerating its expansion into the global market.
