China’s EV Sales, Including Plug-Ins, Rose 18% in 2025, Reaching 54% of the Market

In 2025, sales of EVs and plug-ins rose in China, while the transition away from gasoline-powered cars has slowed in the U.S. and Europe. Chinese brands took nearly two-thirds of the home market, leaving others in a fight for survival.

On January 9, 2026, The Wall St. Journal reported China reinforced its dominant position in the global electric vehicle industry in 2025, with domestic manufacturers continuing to gain market share from foreign automakers in the world’s largest automotive market. Total sales of battery electric vehicles and plug-in hybrids reached nearly 13 million units, representing 54% of all vehicles sold in the country last year. With the exception of Tesla, the main EV producers are Chinese companies such as BYD and Geely, and the rapid shift toward electrification has enabled Chinese brands to capture close to two-thirds of the overall passenger vehicle segment.

Combined sales of EVs and plug-in hybrids increased 18% year over year, in sharp contrast to the slower momentum seen in the United States and Europe, where the phase-out of gasoline vehicles has decelerated. According to Cui Dongshu, secretary-general of the China Passenger Car Association (CPCA), Chinese automakers excel in intelligent vehicle technology and iterate new products at a faster pace. He stated that Chinese companies will continue to have a relatively clear advantage over many foreign competitors.

CLSA analyst Xiao Feng projected that EVs and plug-in hybrids could reach approximately 75% of China’s market share in the coming years, potentially displacing most foreign automakers from the Chinese market by 2030 or later, aside from a limited number of strong players such as Toyota and Volkswagen. For many other foreign companies, it is basically impossible for them to catch up in the EV space, he said.

Meanwhile, regulatory shifts and policy shifts, such as cutting the federal EV tax credit in September in the United States, are prompting American automakers to scale back EV strategies. General Motors recently disclosed a 6 billion dollar charge tied to losses in its EV division, following Ford’s December announcement of 19.5 billion dollars in charges largely linked to electric vehicles.

Sales of pure battery electric vehicles in China reached 7.9 million units in 2025, roughly six times the estimated U.S. EV total of about 1.3 million vehicles, which likely finished last year flat compared with 2024, according to Cox Automotive. In response to mounting competitive pressure, foreign carmakers have accelerated restructuring efforts in China. Volkswagen ceased production at a facility in Nanjing, and GM announced plant closures, also indicating expected fourth quarter charges of approximately 1.1 billion dollars associated with its China operations.

Tesla, the only foreign automaker with a major presence in China’s EV market, also faced headwinds. Its China sales declined nearly 5% to roughly 626,000 units in 2025, CPCA data showed.

Volkswagen is attempting to regain momentum in China with a portfolio of new, locally developed models that have been years in the making. Toyota is constructing a new Lexus EV facility in Shanghai, and GM stated that all new vehicles introduced in China this year will include either EV or plug-in hybrid variants. Ford and Nissan have increasingly repositioned China as an export base to absorb excess production capacity.

Competition across the market remains intense, characterized by ongoing price cuts and aggressive promotions. A China Automobile Dealers Association survey found that only about 30% of dealers were profitable in the first half of 2025, while nearly three-quarters sold at least some vehicles below cost. To stimulate consumption, Beijing expanded purchase incentives, offering up to roughly $2,900 dollars to buyers trading older vehicles for EVs or plug-in hybrids. About 11.5 million vehicles were bought through this trade-in initiative during 2025, according to government figures.

However, subsidy funds in certain regions were exhausted by December, contributing to a 14% drop in monthly passenger car sales to 2.3 million vehicles compared with the prior year. Some consumers delayed purchases in anticipation of improved incentives, although the central government is scaling back elements of the program in 2026. Overall, China’s passenger vehicle market grew at its slowest pace in three years, increasing about 4% to 23.7 million units last year.

China’s BYD Overtakes Tesla as World’s Top EV Seller in 2025

The BBC reported on January 2, 2026, that China’s BYD has surpassed Tesla to become the world’s largest seller of electric vehicles, marking the first time the Chinese automaker has outsold its U.S. rival on a full-year basis. Tesla reported that its global sales fell nearly 9% in 2025 to 1.64 million vehicles, representing a second straight year of declining deliveries under the mistakes of a bad, increasingly incompetent CEO. BYD, by contrast, disclosed that its battery-electric vehicle sales climbed almost 28% last year to more than 2.25 million units.

Equity analysts have recently reduced Tesla’s 2026 sales forecasts, indicating weaker expectations for near-term performance. Chinese brands including Geely, MG, and BYD have intensified competition by offering lower-priced models than many established Western automakers. In response, Tesla introduced lower-cost versions of its two top-selling U.S. models in October 2025 to stimulate demand.

Market observers note that Tesla’s planned robotaxi and autonomous driving initiatives in 2026 will be central to the company’s trajectory. Despite ongoing questions surrounding the feasibility and timing of full self-driving capabilities, some analysts remain bullish regarding Tesla’s shaky competitive position in autonomy.

While BYD’s sales expansion continued, its 2025 growth rate slowed to the weakest level in five years due to intense price competition in its core Chinese market. The company nevertheless remains a dominant global EV manufacturer, leveraging aggressive pricing to gain share. Its international growth has accelerated across Latin America, Southeast Asia, and select European markets, even amid the introduction of higher tariffs on Chinese-made EVs.

BYD reported in October that the United Kingdom has become its largest market outside China, with sales rising 880% in the 12 months ending in September, driven largely by demand for the plug-in hybrid Seal U sport utility vehicle.

In December 2025, BYD announced it had reached a major manufacturing milestone with the production of its 15 millionth new energy vehicle at its Jinan factory, achieving the mark just 13 months after surpassing 10 million units.

China’s Path to EV Dominance

At the start of the 2000s, China trailed Japan, Germany, and the United States in overall automobile production. Although the country manufactured internal combustion engines at scale, it was not yet a leading producer of complete vehicles. Less than three decades later, the picture has shifted dramatically. By early 2026, China is expected to produce more than 60 percent of the world’s electric vehicles. Even U.S. automaker CEOs now look to China for lessons in EV strategy and execution. The central question is how the United States lost its leadership position so rapidly while China surged ahead.

Government Subsidies and Industrial Policy

China’s commitment to electric vehicles began at the policy level. In 2001, EV technology was identified as a strategic priority in the nation’s Five-Year Plan, the government’s highest-level economic framework. By 2025, Chinese government communications continued to emphasize EVs as a national priority, framing new energy vehicles as the pathway for China to move from an “automobile power” to an “automobile powerhouse.”

Direct financial support followed. In 2009, China launched subsidies for manufacturers of electric buses, taxis, and passenger cars, when annual EV sales in the country were still below 500 units. In 2010, five cities, including Shanghai, Shenzhen, Hangzhou, Hefei, and Changchun, were selected as pilot locations for heavily subsidized EV deployment. The “Ten Cities, Ten Thousand Vehicles” program accelerated electrification of public transport fleets, and Shenzhen ultimately became the first city in the world to fully electrify its buses. These large public contracts created stable revenue streams and valuable operational data for manufacturers, enabling rapid learning and product iteration.

Consumer incentives also played a role. Beginning in 2017, EVs were issued distinctive green license plates and granted benefits such as free parking and preferential delivery access in select cities. By 2018, EV buyers in major metropolitan areas like Beijing and Shenzhen were exempt from license plate lotteries and long wait times, gaining immediate access to plates that otherwise cost thousands of dollars or required years of delay.

Subsidy criteria tightened in 2018, restricting benefits to vehicles with ranges exceeding 300 kilometers. Even with stricter rules, government support in 2019 still accounted for nearly one-third of total industry revenue. Between 2009 and 2022, cumulative public investment in subsidies, R&D, and tax relief surpassed $29 billion. Foreign firms benefited as well. Tesla’s Shanghai Gigafactory, launched in 2018, was built with extraordinary speed due to strong government facilitation, spurring domestic automakers to accelerate innovation in response.

In 2023, formal subsidies were phased out and replaced with a “dual-credit” system. This system allows companies exceeding EV production targets to sell credits to firms falling short of regulatory requirements. Tax exemptions are expected to total approximately $97 billion through 2027, continuing indirect support for the sector.

Industrial Ecosystem, Clusters, and Talent

The ecosystem supporting EV growth also deepened. A pivotal moment occurred in 2007 when Wan Gang, an engineer with prior industry experience at Audi, became Minister of Science and Technology. Often referred to as the “father of China’s electric vehicle industry,” he championed EV development and personally evaluated early vehicles such as Tesla’s first Roadster.

By 2025, China had built out a robust talent pipeline, including nearly 50 graduate programs specializing in battery chemistry and metallurgy. The majority of globally cited research in battery technology, approximately 66 percent, now originates from China compared with roughly 12 percent from the United States. Leading Chinese manufacturers reflect similar scale advantages. BYD alone employs around 120,000 engineers, a figure comparable to Tesla’s entire global workforce.

Together, long-term industrial policy, sustained public investment, deep talent pools, and aggressive scaling have positioned China as the dominant force in the global electric vehicle market.