China: The decline in domestic passenger car sales likely worsened in September

Nomura's Asia Chart Alert reports that China's decline in domestic passenger car sales likely worsened in September, marking the steepest domestic sales contraction so far this year despite robust export growth. Advance estimates from the CPCA suggest domestic passenger car retail sales volume growth dropped to -29% y-o-y in September from -23.6% in August and -20.9% in July, due to payback effects from the scaled-back trade-in scheme and the rise in the EV purchase tax to 5% from 0%. The auto sector accounts for 3.2% of GDP, and domestic sales are expected to remain a major growth drag in Q4. Growth in auto exports remained robust, moderating in volume terms to 67.1% y-o-y in August from 84.7% in July, as highly elevated fuel prices boosted global demand for Chinese EVs. However, exports accounted for only 19% of China's total auto market by volume and 15% by value in 2025, providing only a limited offset to weak domestic demand. The persistent weakness in domestic sales alongside rob