This article first appeared on GuruFocus.
China’s new-energy vehicle market is entering a more fragile stretch as policy tailwinds fade and growth momentum cools. The China Passenger Car Association said combined retail sales of pure-electric vehicles and plug-in hybrids may rise about 10% this year, slowing from 18% growth in 2025 after falling short of the group’s earlier 20% forecast. While demand proved resilient into year-end, with sales rising 2.6% in December, the gradual withdrawal of government-backed trade-in subsidies could weigh on consumer appetite at a time when the industry is already grappling with overcapacity and an entrenched price war.
That pressure is starting to show among the sector’s biggest names. BYD (BYDDF) and Tesla (NASDAQ:TSLA) have both been losing ground in China as competition intensifies, even though BYD became the country’s largest electric-car seller. The association noted that BYD’s domestic growth was its slowest in five years, underscoring how quickly rivals such as Geely Automobile Holdings and Zhejiang Leapmotor Technology are gaining traction by rolling out competitive mass-market models that appeal to cost-conscious buyers.
Looking further out, the PCA expects a U-shaped pattern in 2026, with a stronger start and finish to the year but a softer middle, while total domestic retail volumes are projected to remain flat. Exports remain one of the few areas of relative strength after growing about 20% last year, though that channel could face rising uncertainty as political tensions prompt tariffs and other barriers from key trading partners. For investors, the picture suggests a market that may need to lean more heavily on overseas demand and competitive positioning to navigate a slower-growth phase at home.