China's EV Market Plunges 20% in Q1: BYD Sales Drop 40%, German Brands Hit Record Low

China’s electric vehicle (EV) market experienced a sharp decline in the first quarter of 2025, with new registrations dropping by nearly 20% compared to the same period last year. A total of 1.2 million EVs were registered across the country, according to industry data.

The slump follows the expiration of a long-standing tax rebate on new EV purchases, which had previously subsidized up to a third of the purchase price in the entry-level segment. The removal of these incentives has significantly dampened demand, particularly for budget-friendly models.

BYD and Geely Lead Export Push Amid Domestic Slowdown

Chinese automaker BYD reported a 40% year-over-year decline in domestic sales, totaling just 300,000 units in Q1 2025. In response, the company ramped up exports, shipping over 300,000 vehicles during the quarter—an increase of more than 100,000 units compared to Q1 2024. Despite this aggressive push, overseas gains have not offset domestic losses.

Geely also saw a substantial rise in exports, nearly doubling its shipments to 147,300 units in Q1 2025. The company has set ambitious goals, including plans to outsell Ford by 2030 with a lesser-known Chinese brand.

Production Capacity Concerns Grow

Analysts warn that the decline in local EV sales may lead BYD to underutilize its expanded production capacity, which was built on expectations of continued growth. The company’s rapid expansion has left it vulnerable to market downturns, raising concerns about idle facilities and financial strain.

German Automakers' Market Share Hits Record Low

German luxury automakers—Volkswagen, Audi, BMW, Mercedes-Benz, and Porsche—saw their combined EV market share in China plummet to just 1.6% in Q1 2025, the lowest on record. Only 19,200 new EVs from these brands were registered between January and March, marking a 55% drop year-over-year.

Breaking down the declines:

• Volkswagen: EV sales fell by over 72%
• BMW: Sales dropped nearly 65%
• Mercedes-Benz: Registrations slipped by around 14%

The steep declines highlight the challenges faced by foreign automakers in competing with local brands that offer more affordable and technologically advanced EVs.

Strategic Partnerships and Cost-Cutting Measures

In response to the market downturn, German automakers are forming strategic partnerships with Chinese firms to reduce costs and improve competitiveness. These collaborations include:

• Audi: Launched the China-exclusive AUDI brand with SAIC in 2024 and is preparing a third all-electric model.
• Volkswagen: Partnered with Xpeng to develop the ID. Aura T6 and ID. Unyx 09, unveiled at the Beijing Auto Show. Local production has cut costs by at least 40%.
• Mercedes-Benz: Partnered with a local company to produce the all-electric GLC EQ and new electric C-Class exclusively for the Chinese market.
• BMW: Introduced the iX3 and i3 in long-wheelbase form for sale in China, though expectations for recovery remain low.

Analysts suggest that these partnerships may help stabilize market share, but a quick rebound is unlikely. Some industry observers, including those at Handelsblatt, indicate that the road to recovery will be challenging, with prolonged underutilization of production capacity posing a significant risk.