China's domestic auto sales fell 23.1 per cent year on year in the first two months of 2026 as reduced government stimulus and new policies cooled demand, according to combined dispatches.

The China Association of Automobile Manufacturers said sales dropped to 2.8 million vehicles in January and February. Deliveries of new energy vehicles fell 27.5 per cent to 1.1 million units, while internal combustion engine sales declined 19.8 per cent to 1.7 million. Including exports, total vehicle sales fell 8.8 per cent to 4.2 million.

The association cited weaker consumer sentiment, front-loaded demand, the Spring Festival holiday and a high base effect from 2024. A key factor was the halving of the long-standing purchase tax exemption for NEVs, which now face a five per cent levy compared with 10 per cent for gasoline cars.

Tesla reported China-made EV sales rose for a fourth consecutive month in February, with 58,600 Model 3 and Model Y units delivered, up 91 per cent from a year earlier. Exports from its Shanghai plant surged five-fold to 20,000 vehicles.

BMW will recall 147,830 vehicles in China over a starter motor defect that could cause starting difficulties or pose a fire risk, according to the State Administration for Market Regulation. The recall covers imported 2 Series, 4 Series, 5 Series, 6 Series, 7 Series, X4, X5, X6 and Z4 models built between July 2020 and December 2022.

The German automaker said in February that a mid-six-figure number of cars worldwide would be affected by the global recall.