2026 Auto Price War Begins: Luxury Brands Lead the Drop, ICE and EVs Both Cut Prices

In January 2026, China's passenger vehicle market witnessed a new wave of price cuts, with 17 models lowering their prices—more than double the eight models reduced during the same period in 2025 and significantly above the monthly average of last year. Among these, fuel-powered vehicles led the trend, accounting for 10 models, while in the new energy segment, six battery-electric vehicles (BEVs) and one extended-range electric vehicle (EREV) followed suit. The average price reduction across all models reached RMB 37,000, representing a 14.9% decline—substantially higher than the full-year average of 10.5% in 2025. Luxury brands, including BMW, spearheaded the cuts, with some models offering "lower prices plus enhanced specifications." The primary driver behind this round of price reductions is the phasing out of the new energy vehicle (NEV) purchase tax exemption policy: starting in 2026, the full exemption will be halved, prompting automakers to lower official prices to offset rising costs for consumers. Additional factors include mounting inventory pressure for fuel-powered vehicles, intensifying competition in the premium segment, and an ongoing restructuring of pricing strategies across the industry. Industry insiders anticipate that as inventory levels normalize and new models launch, the intensity of price cuts will be front-loaded in the first half of the year and taper off later. The sector is now shifting from a phase of "price-driven competition" toward one centered on "value-based competition."