by GE Cheng

China's auto production and sales climbed to record highs in 2025, powered by a rapid shift to electric vehicles and a jump in exports, highlighting the country's growing influence on global car markets. Growth, however, is expected to cool in 2026 as price competition intensifies and policy support eases.

Data released on Thursday by the China Association of Automobile Manufacturers (CAAM) showed vehicle output rose to 34.53 million units last year, while sales reached 34.40 million, both all-time highs. New energy vehicles (NEVs), including pure electric and plug-in hybrid models, sold more than 16 million units, accounting for over 50% of domestic new-car sales for the first time in a major global market.

Exports climbed 21.1% to 7.098 million units, extending China's lead as the world's largest auto exporter for a third straight year and adding pressure on overseas rivals amid already tight pricing.

CHEN Shihua, deputy secretary-general of CAAM, said the industry showed strong resilience in 2025,  as key indicators strengthened across the sector.

Looking ahead, Chen said total vehicle production and sales are likely to reach 34.75 million units in 2026, implying growth of about 1%, as the market shifts from rapid expansion to a more mature phase focused on efficiency and profitability.

Passenger vehicles continued to drive growth. Passenger car production and sales rose to 30.27 million and 30.10 million units, up more than 9% year on year, supported by government-backed trade-in incentives, a steady pipeline of new models and still-robust consumer demand.

Chinese brands strengthened their grip on the market, with sales of locally branded passenger cars jumping 16.5% to 20.94 million units. Their market share rose to 69.5%, reflecting gains in electric drivetrains, software and cost competitiveness that have reshaped the competitive landscape.

New energy vehicles were the main engine of export expansion. NEV shipments doubled to 2.615 million units, including 1.646 million pure electric vehicles and 969,000 plug-in hybrids, highlighting China's growing role in supplying affordable electrified models to overseas markets.

Among exporters, Chery Automobile shipped 1.344 million vehicles, while BYD recorded the fastest growth, exporting 1.054 million units, up 1.4 times from a year earlier.

Banks are divided on the outlook for 2026. JPMorgan forecasts a 4% rise in passenger vehicle sales, with NEV penetration exceeding 55%. UBS is more cautious, projecting a 2% decline in passenger vehicle sales and a slowdown in EV wholesale growth to 15%, from 28% in 2025.

Industry officials and analysts broadly agree that while volumes may stabilise, structural change will accelerate. Price wars are expected to ease as regulators curb cut-throat competition, shifting the focus toward margins, technology and overseas expansion.