China's New Car Sales Drop 20% in First Five Months of 2026; Used Car Sales Near New Car Volumes, EVs Emerge as Market Bright Spot

In the first five months of 2026, China’s retail sales of new vehicles totaled 8.148 million units, a decline of over 20% year-on-year. During the same period, used vehicle transactions reached 8.095 million units, up 2.3% year-on-year, marking the first time the ratio of new to used vehicle transactions reached 1:1. New energy vehicles (NEVs) stood out in both markets. NEV sales in the first five months amounted to 5.802 million units, an increase of 3.5% year-on-year, accounting for 47.5% of total new vehicle sales. Used NEV transactions reached 685,400 units, surging 25.7% year-on-year. The resurgence of purchase tax on new NEVs has raised their acquisition costs, while used NEVs remain exempt from this tax, giving them a price advantage that is driving transaction growth. From January to May 2026, a total of 82 vehicle models reduced prices, with average discounts widening to 12.5% for NEVs and 14.6% for fuel-powered vehicles. The three-year resale value retention rate for electric vehicles dropped from 54.7% in 2023 to 45.2% in the first half of 2026, while that for fuel-powered vehicles fell from 67.6% in 2022 to 52.7%. The contribution of new vehicle sales to dealer gross profit shifted from +19.7% in 2022 to -25.5% in 2025, making after-sales services—including maintenance, used vehicle sales, and financial services—the primary source of profits.