Chinese EV makers prepare for 2026 survival test as global expansion accelerates

BEIJING — China’s electric car boom will end in 2025 on a muted note, with sales falling and analysts warning that a fierce price war is likely to persist.

Not only Tesla see his sales drop of 7.4% compared to a year ago, but market leader BYD also reported a 5.1% decline, according to data from the China Passenger Car Association covering January to November.

BYDPassenger car sales in November fell 26.5% even more sharply than a year ago, while new competitors, including vehicles equipped with Huawei software and models of Xiaomirecorded sales growth of more than 90% during the same period.

The first trio of Chinese electric car startups listed in the United States – Nio, Xpeng And Car Li – failed to make the top 10 sellers of the month, despite improving monthly deliveries.

Market concentration has increased significantly. The top ten manufacturers now account for about 95 percent of China’s new energy vehicle market, a sharp increase from about 60 percent to 70 percent just two to three years ago, according to Xiao Feng, co-director of China industrial research at Citic CLSA. New energy vehicles include battery electric cars and hybrid cars.

“I think there will be more consolidation in the industry, even though pricing matters more than some brands,” he said. “Clearly, buyers won’t buy a car they [have] never heard of it.”

The scale of the price cuts highlights the pressure. Autohome, an online platform for car sales data in China, even lists vehicles by discount percentage, such as a drop of 432,000 yuan ($61,660) for the Mercedes-Benz EQS EV or a reduction of 147,000 yuan for the Volvo XC70.

Paul Gong, head of China auto research at UBS, expects the price war to continue “for years”, while domestic policy changes will likely weigh on growth next year.

Beijing is on the verge of re-impose a purchase tax while reducing subsidies for recovery purchases, he said. UBS forecasts that the growth rate of electric car sales in China will fall by about half next year, compared to about 20% in 2025.

The market is already saturated, with new energy vehicles representing 59.4% of new passenger cars sold in China in November, according to the China Passenger Car Association.

In the first half, Hangzhou-based Geely said its exports of electric cars quadrupledhelping to bring overall vehicle exports to 184,000. The company entered Australia, Vietnam and four other markets during this period, expanding its presence to approximately 90 countries. The automaker has also launched factories in Egypt, the Middle East and Indonesia.

Geely ranks second behind BYD in sales of new energy vehicles in China.

BYD is also expanding its production overseas, including a new factory in Hungary is expected to accelerate its manufacturing in 2026. The company exported more than 131,000 cars just in November.

Tu Le, founder and chief executive of consultancy Sino Auto Insights, expects more Chinese automakers and battery makers to “firmly assert their rights in Europe,” bringing competition closer to the United States and Tesla.

German automobile giant Volkswagen forged local joint ventures with Xpeng and a Chinese auto chip designer Horizon Robotics. Volkswagen’s largest research and development center outside Germany is in Hefei, China, where the automaker said last month it can now complete each step of the vehicle development and approval process locally for the first time.

This capability could help Volkswagen launch cars more quickly in China, with several new models planned for 2026.

In the first three quarters of 2025, Volkswagen delivered more than 1.9 million vehicles in China, down 4% from last year, less than the 2.4 million vehicles delivered to Western Europe.

The size of the Chinese market remains lucrative for foreign companies. “This is not lost on U.S. automakers,” said Le of Sino Auto Insights.

He stressed that General Motors continues book almost 2 million cars per year in China and, like Ford, also exports cars from the country. Automakers could move that production capacity inland if they can design vehicles that can compete in China, he said, noting that “that’s where GM is closer than Ford.”

Le warned that it may be too early for any automaker, domestic or foreign, to declare victory in the world’s largest auto market.

“But in China, you could be ahead one month, and the next quarter you’ll be catching up and wondering what happened.”

Correction: This story has been updated to reflect Volkswagen’s delivery figures. A previous version gave incorrect figures.