China’s turbocharged EV market hits a speed bump amid falling sales and rising costs

Electric vehicle deliveries in mainland China slumped by more than 40 per cent in January, darkening the outlook for a sector grappling with rising production costs and the gradual withdrawal of government support.The country’s roughly 50 electric carmakers sold about 900,000 vehicles last month, down 42.3 per cent from 1.56 million units in December, according to preliminary data released by the China Passenger Car Association (CPCA) on Wednesday.The figures, which include retail sales, exports and dealer stockpiling, marked a second consecutive month-on-month decline and were broadly in line with analysts’ expectations for softer demand in 2026.“The once fast-growing EV sector has hit a speed bump this year as government stimulus retreats,” said Zhou Ling, a hedge fund manager at Shanghai Shiva Investment. “With cost pressures already building, it will become increasingly difficult for manufacturers to make profits.”Deliveries from Tesla’s Shanghai Gigafactory, which produces the Model 3 and Model Y, fell 28.9 per cent month on month to 69,129 vehicles in January, CPCA data showed.Other major players also reported sharp drops. Carmakers including BYD, the world’s largest electric vehicle producer, and Tesla rival Xpeng said sales weakened after Beijing scaled back tax incentives.China’s EV market has expanded at breakneck speed over the past decade, buoyed by subsidies and tax exemptions. Photo: AFP