China cuts EV tax breaks in half and adjusts trade-in subsidies

BYD plans to sell 1.3 million vehicles in international markets this year, marking a nearly 25% jump from 2025 as the Chinese electric car giant looks abroad while facing mounting pressures back home.

Li Yunfei, general manager of BYD’s brand and public relations division, announced the overseas sales goal at a media briefing in Shanghai on Saturday. The target represents an increase from the 1.05 million vehicles the company sold outside China last year.

The push for more international sales comes as BYD deals with a tougher environment in its home market. Strong performance abroad last year helped the automaker claim the top spot globally for electric vehicles, pushing past Tesla. But now the company faces weakening demand in China as the government pulls back on programs that encouraged people to buy electric cars, and local rivals step up their game.

The new target may fall short of what some financial analysts expected. Citigroup said in November that BYD was working toward overseas sales of 1.5 million to 1.6 million units in 2026, based on talks with company leaders.

China’s electric vehicle market is entering a new phase this year with major changes to government support programs. Since January 1, buyers of new energy vehicles no longer get a full tax break on their purchases. Instead, they now receive only half of the previous exemption, according to CarNewsChina.

Market watchers predict growth in electric and plug-in hybrid vehicle sales will slow down this year. Bloomberg reports that combined sales of these vehicles are expected to grow by around 10% in 2026, a sharp drop from the 18% growth seen in 2025.

The Chinese government has also changed how its trade-in program works. New rules raise the minimum price needed to get the maximum rebate, which means cheaper models get less support. These adjusted subsidies particularly affect brands like BYD that focus on lower-priced vehicles.

BYD and other Chinese electric vehicle makers now operate in a changed landscape. At home, they must work harder for each sale as government help decreases and more companies fight for customers. Abroad, they face barriers like tariffs but also see opportunities as major markets like Europe consider new approaches.

Europe takes a welcoming approach

The European Union is considering a new approach that would replace high import taxes with minimum price requirements. This shift signals improving relations between the two sides after months of trade friction.

Under the European plan, Chinese carmakers would agree to sell their vehicles at or above certain prices instead of paying tariffs at the border. The pricing system would factor in government subsidies that manufacturers receive.

Chinese brands have been making steady progress in Europe despite the tariffs. In November 2025, they held 12.8% of the European electric vehicle market. That growing presence shows Chinese carmakers can compete even when facing extra costs at the border.

BYD’s rise comes as Tesla struggles with its own challenges. Tesla’s 2025 deliveries fell 8.6% to 1.64 million from 1.79 million in 2024, marking a second consecutive year of decline for the American electric vehicle maker. The drop helped BYD secure its position as the world’s largest electric vehicle seller.

For BYD, the strategy seems clear. Grow overseas sales to make up for slower growth at home. Whether the company can reach its 1.3 million unit target, or push higher as some analysts predicted, will depend on how quickly these market changes unfold in both China and Europe over the coming months.

Join a premium crypto trading community free for 30 days - normally $100/mo.