China's electric vehicle (EV) market is facing a slowdown, with BYD's sales hitting a near two-year low in January. This trend is causing concern for the world's largest auto market, as it coincides with rising fears about weak domestic demand and overproduction spilling into other countries. At least six major EV brands, including Xiaomi and Xpeng, reported sharp sales drops in January compared to December, according to CNBC's analysis. This comes as policy changes prompt consumers to delay car purchases, and automakers become more cautious about new vehicle launches. The Lunar New Year holiday, which affects sales figures, is also a factor. However, the market is not without its bright spots. Aito, Leapmotor, and Nio saw year-on-year deliveries rise, and Xiaomi's electric car sales increased despite a planned upgrade to its SU7 sedan. Fierce competition from local rivals, such as Geely, is pushing automakers to offer more features at lower prices. Geely has climbed into second place in China's electric car market, behind BYD, and expects overall new energy vehicle sales to grow by 32% in 2026. Despite recent headwinds, BYD is expected to retain its dominance in both domestic and international markets due to planned upgrades to its charging, energy storage, and intelligent driving infrastructure. The broader economic impact of the slowdown is concerning, as the autos sector contributes to about 30 million jobs in China, or more than one-tenth of urban employment. However, the economic share of the autos sector is still relatively small compared to real estate, and the industry expects Beijing to reinstate subsidies if the slowdown worsens further.
