(Yicai) July 14 -- Sales of used cars in China approached those of new vehicles for the first time ever in the first five months of the year, as the cancellation of purchase tax rebates made buying new autos more expensive.

China's retail sales of new cars plunged over 20 percent to 8.15 million units in the five months ended May 30 from a year earlier, according to data released by the China Automobile Dealers Association at the 2026 China Used Car Conference. In comparison, second-hand vehicle sales rose 2.3 percent to 8.1 million units in the period.

Autos used three to six years accounted for 43.6 percent of the total sales between January and May, up from 41.3 percent in the same period last year. Those under three years made up 30 percent, up from 26.9 percent, and those over 10 years took 10 percent, down from 10.6 percent.

The resumption of the purchase tax on new energy vehicles this year has increased the cost of buying new cars, Cui Dongshu, secretary-general of the China Passenger Car Association, told Yicai. Meanwhile, used NEVs are exempt from the purchase tax, highlighting their price advantage and driving counter-trend growth in the used car market, he added.

The NEV segment has performed exceptionally well in both the new and used car markets. In the first five months, new NEV sales climbed 3.5 percent to 5.8 million units from a year earlier, and used NEV transactions surged nearly 26 percent to 685,400 units.

The development of the Chinese used auto market still faces several challenges. For instance, the decline in new car prices impacts the prices and depreciation rates of second-hand cars. The monthly NEV penetration rate has surpassed 60 percent, further squeezing the market space for fossil fuel vehicles, which has led to a collapse in related prices.

The resale value of electric vehicles in China dropped to 45.2 percent in the first half from 54.7 percent in 2023, according to a recent report by the CADA and Jingzhengu Information Technology. Similarly, the resale value of fuel vehicles fell to 52.7 percent in the first half from 67.6 percent in 2022, indicating that the entire pricing structure in the used car market has entered a phase of deep restructuring.

The top three best-selling used compact cars from joint ventures between Chinese and foreign traditional automakers are the Volkswagen Lavida, Volkswagen Sagitar, and Toyota Corolla. None has reached a three-year resale value of 50 percent. For pure electric compact cars, the top three by sales were the Volkswagen ID.3, the BYD e2, and the BYD Qin Plus, with the former's three-year resale value falling below 45 percent.

Editor: Futura Costaglione