Exports Rescue China’s Car Sector as Domestic Sales Plunge 24.5 Percent
(MENAFN) Surging overseas shipments are propping up China’s auto industry as domestic demand collapses, but looming regulatory changes and thin profit margins are set to cap the sector’s prospects in 2027, Fitch Ratings said Monday.
The credit rating agency forecast that retail passenger-car volume at home will fall roughly 20% in 2026. It expects only a modest low-single-digit rebound next year, supported by product upgrades and a rush of new-energy vehicle (NEV) purchases before the tax rebate expires.
Domestic retail deliveries of passenger cars plunged 24.5% year-on-year in the third quarter of 2026, while wholesale deliveries slipped 5.8%, the report showed. It said artificial intelligence (AI) adoption and NEV market penetration reached 65.8%, as demand for internal combustion engine models remained depressed.
Exports carry the sector
Overseas sales remained the main engine of growth. Passenger-car exports jumped 72% from a year earlier to a record 2.7 million units in the third quarter, with NEVs making up 59% of all overseas deliveries, the agency said.
Fitch expects shipments abroad to stay strong for the next one to two quarters as manufacturers rush cars out ahead of regulatory changes.
Export growth is projected to slow sharply next year for two reasons: potential EU import quotas on Chinese-built hybrids, starting in late 2026, and a cut in China’s NEV export VAT rebate to 9% from 13% beginning in April 2027. Rising demand in emerging economies and expanding European manufacturing capacity should soften the blow, the agency added.
Margins under pressure
The industry’s finances remain fragile. Operating profit across China’s auto manufacturers fell 23% year-on-year from January to September, according to Fitch. The sector’s operating margin narrowed to 3.3% over the nine months and dropped to 1.4% in September.
The credit rating agency forecast that retail passenger-car volume at home will fall roughly 20% in 2026. It expects only a modest low-single-digit rebound next year, supported by product upgrades and a rush of new-energy vehicle (NEV) purchases before the tax rebate expires.
Domestic retail deliveries of passenger cars plunged 24.5% year-on-year in the third quarter of 2026, while wholesale deliveries slipped 5.8%, the report showed. It said artificial intelligence (AI) adoption and NEV market penetration reached 65.8%, as demand for internal combustion engine models remained depressed.
Exports carry the sector
Overseas sales remained the main engine of growth. Passenger-car exports jumped 72% from a year earlier to a record 2.7 million units in the third quarter, with NEVs making up 59% of all overseas deliveries, the agency said.
Fitch expects shipments abroad to stay strong for the next one to two quarters as manufacturers rush cars out ahead of regulatory changes.
Export growth is projected to slow sharply next year for two reasons: potential EU import quotas on Chinese-built hybrids, starting in late 2026, and a cut in China’s NEV export VAT rebate to 9% from 13% beginning in April 2027. Rising demand in emerging economies and expanding European manufacturing capacity should soften the blow, the agency added.
Margins under pressure
The industry’s finances remain fragile. Operating profit across China’s auto manufacturers fell 23% year-on-year from January to September, according to Fitch. The sector’s operating margin narrowed to 3.3% over the nine months and dropped to 1.4% in September.
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