China EVs in 2026 look less like a boom and more like a survival test as global expansion ramps up

BEIJING — China’s electrical automotive growth is ending in 2025 on a mushy observe, with gross sales dipping and analysts warning that a fierce worth battle is prone to persist.

Not solely did Tesla see its gross sales drop by 7.4% from a yr in the past, however market chief BYD additionally reported a 5.1% decline, in keeping with knowledge from the China Passenger Automotive Affiliation protecting January by November.

BYD‘s passenger automotive gross sales in November alone fell by an excellent steeper 26.5% from a yr in the past, whereas newer rivals, together with automobiles powered by Huawei software program and fashions from Xiaomi, recorded gross sales progress of greater than 90% throughout the identical interval.

The early trio of U.S.-listed Chinese language electrical automotive startups — Nio, Xpeng and Li Auto — didn’t make the highest 10 sellers for the month, regardless of enhancements in month-to-month deliveries.

Market focus has elevated sharply. The highest ten producers now account for round 95% of the Chinese language new power automobile market — up sharply from round 60% to 70% simply two or three years in the past, in keeping with Xiao Feng, co-head of China Industrial Analysis at Citic CLSA. New power automobiles embrace battery-electric and hybrid-powered automobiles.

“I believe there will likely be additional business consolidation regardless that costs matter greater than particular manufacturers,” he mentioned. “Clearly patrons won’t purchase a automotive they [have] by no means heard of.”

The size of worth cuts highlights the stress. Autohome, an internet platform for automotive gross sales knowledge in China, even lists automobiles by low cost proportion, resembling a 432,000 yuan ($61,660) drop for the Mercedes-Benz EQS EV or a 147,000 yuan discount within the Volvo XC70.

Paul Gong, head of China autos analysis at UBS, expects the value battle to maintain going “for years,” whereas home coverage modifications will seemingly weigh on progress subsequent yr.

Beijing is ready to re-impose a purchase order tax whereas scaling again trade-in buy subsidies, he mentioned. UBS predicts the expansion price of China’s electrical automotive gross sales to roughly halve subsequent yr from round 20% in 2025.

The market is already saturated, with new power automobiles accounting for 59.4% of latest passenger automobiles offered in China in November, in keeping with the China Passenger Automotive Affiliation.

Slowing demand at house is pushing Chinese language electrical carmakers to increase aggressively abroad, the place revenue margins are sometimes greater.

Within the first half of the yr, Hangzhou-based Geely mentioned its electrical automotive exports quadrupled, serving to carry total automobile exports to 184,000. The corporate entered Australia, Vietnam and 4 different markets throughout that point, extending its attain to round 90 nations. The automaker has additionally launched factories in Egypt, the Center East and Indonesia.

Geely ranks second to BYD in China’s new power automobile gross sales.

BYD can also be increasing its abroad manufacturing, together with a brand new manufacturing facility in Hungary slated to ramp up manufacturing in 2026. The corporate exported greater than 131,000 automobiles in November alone.

Tu Le, founder and managing director at consulting agency Sino Auto Insights, expects extra Chinese language automotive producers and battery corporations to “firmly stake their claims in Europe,” bringing competitors nearer to the U.S. and Tesla.

Different overseas automotive corporations are nonetheless eager on taking a slice of the China market.

German auto large Volkswagen has solid native joint ventures with Xpeng and Chinese language automotive chips designer Horizon Robotics. Volkswagen’s largest analysis and growth middle outdoors Germany is in Hefei, China, the place the automaker mentioned final month it may possibly now full each step of the automobile growth and approval course of regionally for the primary time.

That functionality may assist Volkswagen launch automobiles extra rapidly in China, with a number of new fashions deliberate for 2026.

Within the first three quarters of 2025, Volkswagen delivered greater than 17 million automobiles in China, up 8.5% from a yr in the past, and way over the 8.9 million automobiles it delivered in Western Europe.

China’s market measurement stays profitable for overseas companies. “It isn’t misplaced for the U.S. automakers,” mentioned Sino Auto Insights’ Le.

He famous that Normal Motors nonetheless delivers almost 2 million automobiles a yr in China, and, like Ford, additionally exports automobiles from the nation. The automakers may flip that manufacturing capability inward if they will design automobiles able to competing in China, he mentioned, noting “that is the place GM is nearer than Ford.”

Le cautioned that it might be too early for any automaker, home or overseas, to declare victory on the earth’s largest auto market.

“However in China, you would be on high one month, and by subsequent quarter, you are enjoying catch-up and marvel what occurred.”