China EV makers brace for 2026 survival test as global expansion accelerates

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

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

BYD‘s passenger car sales in November alone fell by an even steeper 26.5% from a year ago, while newer rivals, including vehicles powered by Huawei software and models from Xiaomi, recorded sales growth of more than 90% during the same period.

The early trio of U.S.-listed Chinese electric car startups — Nio, Xpeng and Li Auto — failed to make the top 10 sellers for the month, despite improvements in monthly deliveries.

Market concentration has increased sharply. The top ten manufacturers now account for around 95% of the Chinese new energy vehicle market — up sharply from around 60% to 70% just two or three years ago, according to Xiao Feng, co-head of China Industrial Research at Citic CLSA. New energy vehicles include battery-electric and hybrid-powered cars.

“I think there will be further industry consolidation even though prices matter more than specific brands,” he said. “Obviously buyers will not buy a car they [have] never heard of.”

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

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

Beijing is set to re-impose a purchase tax while scaling back trade-in purchase subsidies, he said. UBS predicts the growth rate of China’s electric car sales to roughly halve next year from around 20% in 2025.

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

In the first half of the year, Hangzhou-based Geely said its electric car exports quadrupled, helping bring overall vehicle exports to 184,000. The company entered Australia, Vietnam and four other markets during that time, extending its reach to around 90 countries. The automaker has also launched factories in Egypt, the Middle East and Indonesia.

Geely ranks second to BYD in China’s new energy vehicle sales.

BYD is also expanding its overseas production, including a new factory in Hungary slated to ramp up manufacturing in 2026. The company exported more than 131,000 cars in November alone.

Tu Le, founder and managing director at consulting firm Sino Auto Insights, expects more Chinese car manufacturers and battery companies to “firmly stake their claims in Europe,” bringing competition closer to the U.S. and Tesla.

German auto giant Volkswagen has forged local joint ventures with Xpeng and Chinese automotive chips 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 every step of the vehicle development and approval process locally for the first time.

That 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 17 million vehicles in China, up 8.5% from a year ago, and far more than the 8.9 million vehicles it delivered in Western Europe.

China’s market size remains lucrative for foreign businesses. “It’s not lost for the U.S. automakers,” said Sino Auto Insights’ Le.

He noted that General Motors still delivers nearly 2 million cars a year in China, and, like Ford, also exports cars from the country. The automakers could turn that manufacturing capacity inward if they can design vehicles capable of competing in China, he said, noting “that’s where GM is closer than Ford.”

Le cautioned that it could 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 on top one month, and by next quarter, you’re playing catch-up and wonder what happened.”