Over the past five years, China's NEV sales went from 1.3m units (2020) to 16.5m units (2025). That's a 66% CAGR, which is unheard of in the modern history of the automotive industry.
NEV penetration by the end of 2025 reached 52.3% - more than half of all new cars sold in China are battery-powered or assisted (PHEV).
Growth like this cannot be sustained without going through some period of correction or consolidation, especially when subsidies expire, raising the cost for consumers. That's what we're seeing at the start of 2026.
$BYD Co., Ltd.(BYDDF)$ deliveries are down 30% in January. $XPeng Inc.(XPEV)$ is off 34%, $Li Auto(LI)$ fell 7.5%, $Geely Automobile Holdings Ltd.(GELHY)$ 's deliveries almost flat. While other brands saw elevated growth in January, total NEV deliveries grew at a much slower 7.5% year-on-year.
Although it shouldn't be surprising for growth to flatten (or even go slightly negative) in the coming months, the NEV industry is a top priority for development for China. This means a combination of the following can be expected in 2026:
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Renewed consumer subsidies (including trade-in) for new/first-time NEV buyers. Less than 10% of China's total car population are NEVs.
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Acceleration of new model launches by industry players to stimulate demand and interest among consumers.
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Strong push by Beijing to open up new export markets for Chinese NEVs, which have been a new source of growth. This means more trade deals, including with the US, are likely to be announced in the coming months.
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