The 5% purchase tax that was supposed to hurt all EV makers equally in China? It hit BYD like a freight train and barely grazed Tesla. That asymmetry tells you everything about what’s really happening in the world’s largest EV market right now.

Tesla shipped 69,129 vehicles from its Shanghai factory in January, a 9.3% increase from the same month last year, according to Bloomberg, citing preliminary data from China’s Passenger Car Association (CPCA) released Wednesday. It’s the third consecutive month of year-over-year wholesale growth for the American automaker, a streak we haven’t seen since mid-2024.

Here’s what matters:

The fact: Tesla’s Shanghai factory delivered 69,129 vehicles in January 2026, up 9.3% year-over-year from 63,238 units in January 2025.
The delta: Tesla is the only major foreign automaker posting growth in China while nearly every domestic competitor, including market leader BYD, reported steep January declines.
The buyer impact: Tesla’s aggressive 7-year financing and insurance subsidies are absorbing the new purchase tax pain. Buyers who act before February 28 can still lock in the 8,000 yuan ($1,153) Model 3 insurance subsidy.

China’s new EV purchase tax exposed who was selling on subsidies and who wasn’t

January 2026 is the first full month where China’s halved NEV purchase tax exemption took effect. The previous full exemption, worth up to 30,000 yuan ($4,200), was cut in half to a maximum 15,000 yuan ($2,100) deduction starting January 1. On top of that, a new 5% purchasing tax now applies to EVs and hybrids. Trade-in subsidies also remain in a transitional phase, with some localities having exhausted their budgets back in December.

The result was a bloodbath for most Chinese automakers. BYD sold just 210,051 NEVs in January, a staggering 30.1% year-over-year decline and a 50% drop from December. Xpeng deliveries tumbled 34% year-over-year to 20,011 units. Li Auto reported 27,668 vehicles, down 7.6% and marking its eighth consecutive monthly year-over-year decline. Even Xiaomi, which rode a record-breaking 2025, pulled back from its December high of 50,212 units to roughly 39,000 in January.

Overall, China’s passenger NEV wholesale volume is estimated at 900,000 units for January, a mere 1% increase year-over-year but a brutal 42% decline from December, per CPCA data.

Tesla grew through all of it.

Tesla’s 7-year financing bet paid off where it counts

Tesla didn’t survive January on brand loyalty alone. The company launched an unprecedented low-interest financing program on January 6, offering up to 7-year terms on all locally produced vehicles. It was the first time any automaker in China had offered financing that long. By month’s end, Xiaomi, Li Auto, Xpeng, and NIO had all copied the move, proving Tesla had identified the right lever to pull when purchase taxes suddenly make monthly payments feel heavier.

Then on January 26, Tesla brought back its 8,000 yuan ($1,153) insurance subsidy for the Modelo 3, available through February 28. The combination of extended financing and direct cost offsets gave Tesla buyers a way to neutralize the new tax burden without Tesla having to cut sticker prices and trigger another round of the margin-destroying price war we’ve been tracking since 2023.

The month-over-month drop is seasonal, not structural

January’s 69,129 units are down 28.9% from December’s 97,171, Tesla’s second-highest monthly total ever from Giga Shanghai. That sequential decline looks alarming in isolation, but context matters. January is always weak in China. Lunar New Year disrupts production and buying patterns, and the year-end rush to lock in expiring incentives inflates December numbers artificially.

BYD’s 50% month-over-month collapse tells the same seasonal story, just louder. The meaningful comparison is year-over-year, and on that basis Tesla is trending in the right direction for the first time since September 2024, when sporadic monthly rebounds kept getting followed by deeper drops.

For reference, here’s how Tesla’s January numbers have tracked:

January 2024: 71,447 units
January 2025: 63,238 units (-11.5% YoY)
January 2026: 69,129 units (+9.3% YoY)

Tesla still hasn’t recovered to January 2024 levels. But the trajectory has reversed.

BYD’s overseas pivot accelerates as domestic demand collapses

BYD‘s 30% January decline is the most significant data point in this report. The Shenzhen-based company has surpassed Tesla as the world’s top seller of pure-electric vehicles, but its domestic foundations are cracking. When we covered BYD’s third consecutive monthly decline back in November, we warned that the easy growth era was ending. January’s numbers confirm the trend has only accelerated under the new tax regime.

BYD’s response is to push harder overseas. The company’s international shipments surged more than 50% in recent months, now accounting for nearly half of total sales. BYD is targeting 1.3 million overseas deliveries in 2026, a 24% increase. But as we documented in January, rising European tariffs and regulatory barriers are narrowing the escape route. Factories in Hungary, Turkey, and potentially Spain are a multi-year fix for a problem that’s hitting right now.

NIO was the real winner in January

The standout performer that the Bloomberg headline missed: NIO delivered 27,182 vehicles in January, up 96% year-over-year. The third-generation ES8 SUV accounted for 17,646 of those deliveries, or 65% of NIO’s total volume. While Tesla and BYD grab the headlines, NIO’s luxury SUV strategy is quietly working in a segment where price sensitivity is lower and the new purchase tax stings less in absolute terms.

Leapmotor also posted a solid 27% year-over-year gain to 32,059 units. Geely, one of the few traditional manufacturers showing resilience, managed a 1.3% increase to 270,167 vehicles.

EVXL’s Take

I’ve been covering Tesla’s China story throughout 2025, from the three-year sales low in October to the November rebound to losing the global EV crown to BYD. Every time Tesla posted a good month, I called it what it was: a temporary blip, not a recovery. Three consecutive months of year-over-year growth changes that calculus slightly.

Slightly. Not completely.

Tesla’s full-year 2025 China shipments were 851,732 vehicles, down 7% from 2024. The Shanghai factory can produce roughly 950,000 vehicles annually. Running at barely 90% capacity while your main competitor builds new models every 18 months isn’t a winning formula. What’s changed is Tesla’s promotional playbook. The 7-year financing, the insurance subsidies, the targeted Model 3 incentives: these are smart moves that absorb the new tax burden without triggering the kind of headline price cuts that crater resale values and brand perception.

The real test comes in March and April, after Lunar New Year demand normalizes and we can see whether Tesla’s growth streak is genuine momentum or another seasonal mirage. BYD’s overseas push will also clarify whether the domestic EV king can survive a shrinking home market. I expect BYD’s year-over-year domestic declines to continue through Q1 as the tax shock works through the system, but the company’s export ramp should partially offset the damage by Q2.

For buyers in China right now, the message is simple: automakers are fighting harder for your wallet than they have in years. Take advantage of it.

Editorial Note: AI tools were used to assist with research and archive retrieval for this article. All reporting, analysis, and editorial perspectives are by Haye Kesteloo.