H1 2026 Auto Market Diverges: ICE Used Cars Plummet in Value, New Energy Used Car Sales Surge

From January to May 2026, domestic new vehicle retail sales totaled 7.15 million units, down 19% year-over-year, while used vehicle transactions reached 6.2771 million units, a modest decline of just 0.66%. Aggressive price cuts in the new car market have severely disrupted the pricing structure of the used car sector. In some cases, transaction prices for used internal combustion engine (ICE) vehicles have fallen below acquisition costs, with losses equivalent to the price of a high-end smartphone, prompting dealers to widely liquidate inventory at low prices and reduce stock levels. In May, the Used Car Manager Index dropped to 46.4%, and the wholesale index fell by 7 points in a single month. The average transaction price declined from RMB 67,900 in April to RMB 65,600, placing the overall market firmly in contraction territory. Resale values for ICE vehicles have declined across the board, with mid-to-large SUVs and luxury models hit hardest by new vehicle price reductions. Conversely, compact city-runabout models have seen their resale values rise due to their low operating costs. Transactions of used new energy vehicles (NEVs) continued to grow, with cumulative sales in the first four months up 29.1% year-over-year. However, NEVs still face challenges in retaining value—for example, a 2024 Tesla Model Y loses approximately RMB 100,000 in value within two years of ownership. In May, the two-year resale value retention rate stood at 52.8% for battery electric vehicles (BEVs) and 57% for plug-in hybrids (PHEVs), slightly surpassing that of ICE vehicles. Multiple factors are accelerating the depreciation of ICE vehicles, including high fuel prices and the rapid expansion of charging infrastructure, which are driving consumers toward NEVs. This shift has led to oversupply and shrinking demand in the used ICE vehicle market. Additionally, automakers’ accelerated pace of new model launches is further eroding residual values.