Chinese Auto Sales Fell in January on Subdued Demand

The Chinese auto market started the year on a subdued note, with retail sales of passenger cars falling 12.1% year-on-year to 1.79 million vehicles in January 2025. This decline was primarily driven by a front-loading effect, as consumers rushed to make purchases before the end of the year, leading to a decrease in demand in January. Additionally, uncertainties lingering over the government's subsidies program being extended contributed to the weak demand.

Despite the slow start to the year, the China Passenger Car Association (CPCA) maintains a positive outlook for the nation's auto industry for the rest of 2025. The CPCA predicts a total of 23.4 million retail sales of passenger cars in 2025, a 2% increase from 2024. The association also forecasts new energy vehicle (NEV) retail sales to rise 20% to 13.3 million units, making up 57% of all passenger-vehicle sales for the year.



The electric vehicle (EV) sector continues to be a bright spot in the Chinese auto market, with retail sales of new-energy cars rising 10.5% to 744,000 units in January 2025. This growth is driven by increased sales from electric vehicles and hybrid cars, as well as the extended replacement subsidies provided by the government. The CPCA predicts that NEV sales will continue to grow throughout the year, supported by the extended replacement subsidies and increased consumer demand for cleaner, more efficient vehicles.

Looking ahead, the auto market is expected to see some recovery in February, as demand typically picks up after the Lunar New Year holiday. The CPCA notes that the auto market is expected to see some recovery in February on relatively stronger demand after the Lunar New Year holiday. However, the overall market size is expected to grow 4.7% to 32.9 million units in 2025, indicating that the market remains challenging for automakers.

In conclusion, the Chinese auto market started the year on a subdued note, with passenger car sales declining in January. However, the EV sector continues to show strong growth, and the overall market is expected to recover in the coming months. The government's policies, such as subsidies and license plate restrictions, play a significant role in shaping the market trends and will continue to influence future sales trends. As the market evolves, automakers must adapt their strategies to address changing consumer preferences and maintain growth in the competitive landscape.