China’s auto sales rebounded in September, lifted by seasonal demand and consumer purchases ahead of expiring incentives, though carmakers continue to face challenges from weak sentiment and shifting regulations.

According to data released Monday by the China Passenger Car Association (CPCA), retail sales of passenger vehicles rose 6.3% year-on-year to 2.24 million units, marking an improvement from August’s 4.6% increase. On a month-to-month basis, sales jumped 11%, driven by seasonal promotions and a rush of last-minute buyers.

Despite the uptick, growth remains below the double-digit pace seen earlier in 2024, reflecting continued strain from intense price competition, regulatory scrutiny, and slowing consumer confidence.

The CPCA attributed the improvement largely to seasonal factors and pre-deadline purchases before government incentives expire. However, analysts cautioned that the industry’s momentum could weaken again in October due to the week-long National Day holiday, which typically reduces showroom traffic.

The new-energy vehicle (NEV) segment—comprising battery electric vehicles (EVs) and plug-in hybrids—continued to outperform, with sales surging 15.5% year-on-year to 1.29 million units. From January through September, NEV sales climbed 24% to 8.87 million units, underscoring China’s global leadership in electric mobility.

BYD remained the dominant domestic player, selling 393,060 vehicles in September, while Tesla recorded 90,812 units, up from August but well behind its Chinese rival.

Meanwhile, overall vehicle exports rose 21% year-on-year, with new-energy vehicles accounting for 40% of total shipments, signaling China’s growing strength in the global EV market.

Despite the positive data, shares of Chinese automakers fell in Hong Kong trading Monday, with Nio down 6.2% and Li Auto off 4.9%, reflecting investor concerns over ongoing regulatory uncertainty and shrinking profit margins.

Industry experts say Beijing’s recent crackdown on excessive price-cutting may help stabilize the market in the longer term, but carmakers will need time to adjust strategies and rebuild consumer confidence amid a more competitive landscape.