Gasoline Vehicles Stage Strong Comeback in January 2026, EV Penetration Drops to 38.6%

In January 2026, China's passenger vehicle market witnessed a notable reversal: fuel-powered vehicles made a strong comeback, with the retail penetration rate of new energy vehicles (NEVs) dropping to 38.6%—a three-percentage-point year-over-year decline and the lowest level in nearly two years. Among the top ten best-selling models that month, seven were fuel-powered vehicles. Volkswagen emerged as the biggest winner, with four models—Sagitar, Lavida, Tiguan L, and Passat—each selling over 20,000 units. Industry insiders attribute this short-term resurgence of fuel-powered vehicles to factors such as increased demand for long-distance travel ahead of the Spring Festival, higher consumer familiarity with traditional models, the phasing out of NEV subsidies, and intensified discounts on fuel-powered vehicles at dealerships. However, whether this rebound represents a temporary fluctuation or a longer-term trend reversal will depend on market performance over the next two to four months.