China's auto sales sink in February as phase out of subsidies for trade-ins hits demand

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HONG KONG (AP) — China’s domestic passenger car sales fell sharply in February from a year earlier, industry figures showed Wednesday, reflecting weakening demand as some trade-in subsidies are phased out.

Only 950,000 units of passenger cars were sold in China last month, according to the China Association of Automobile Manufacturers, down from nearly 1.4 million vehicles sold in January. It was the fourth straight month of year-on-year declines.

Overall passenger car sales including exports dropped 15.4% year-on-year, even as shipments overseas jumped 58% to 586,000, highlighting the challenges for Chinese carmakers trying to offset sluggish domestic sales by expanding into foreign markets.

Automakers have been struggling with weak demand as some local governments have been phasing out trade-in subsidies to encourage purchases of electric vehicles. Chinese consumers have also been steering clear of big purchases, feeling a pinch from a slowing economy and protracted property slump.

The Lunar New Year festival, China’s biggest holiday, took place in February, which also likely hurt sales.

Domestic car sales in China will likely continue to weaken this year due to the reductions of government subsidies, said Chris Liu, a Shanghai-based senior analyst at advisory group Omdia.

Chinese automakers make far more vehicles than the home market can absorb and that has led to a fierce price war as they compete for market share.

BYD, which overtook Tesla in 2025 as the world’s biggest EV maker, said its sales fell 41% in February from a year earlier to 190,190 vehicles. Geely Auto, another Chinese auto group, reported a modest 1% rise in sales in February to 206,160.

To help offset domestic weakness, Chinese carmakers will continue to boost exports this year, analysts said.

China's overall passenger car exports could grow roughly 20% in 2026 from last year, according to Yichao Zhang, a partner at AlixPartners. Developing regions such as Southeast Asia are key markets for Chinese automakers seeking to expand sales.

Chinese vehicle manufacturers are likely adapt by cutting costs and shifting toward more high-end models with bigger profit margins, said Claire Yuan, director of corporate ratings for China autos at S&P Global Ratings.