China’s electric vehicle (EV) industry — once the hottest growth story in the global auto space — is now entering a make-or-break year in 2026.
After years of subsidies, price wars and rapid launches from hundreds of start-ups, analysts now say that only the strongest players are likely to survive.
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| Most Chinese EV companies are not profitable -- Photo: East Asia Forum. |
Too many cars, too few buyers
China is the world’s largest car market, but next year it’s expected to see its first drop in total vehicle deliveries since 2020.
That’s a big deal — slowing sales means less room for so many EV makers — and most of them are not profitable.
Right now, around 50 EV brands in mainland China are struggling to make money.
Without strong demand and with government support fading, many have to scale back, restructure or even shut down.
The subsidy crash
For years, government incentives like cash subsidies and tax breaks fuelled booming EV sales.
Buyers enjoyed benefits like a tax exemption — but that won’t last.
From January 2026, EVs will face a 5 per cent purchase tax (up from zero), moving closer to the normal 10 per cent rate by 2028.
A key trade-in subsidy is also up for renewal — and Beijing hasn’t confirmed whether it will continue.
When incentives dry up, every EV maker will have to sell on the strength of their product — not government support.
That’s great for quality and innovation, but tougher for small or unprofitable brands.
Price wars and profit pain
China’s EV market has been through relentless price cuts as brands fight for survival.
Aggressive discounts — especially from big names — forced smaller makers to respond or risk losing sales. That has squeezed profit margins and pushed many companies into losses.
This price pressure contributed to China’s recent slowdown and is partly the reason why even giants like BYD have seen profit fall.
While BYD remains the leader globally and domestically, it hasn’t been immune to the impact of discounting.
Survival of the fittest… and most profitable
Industry experts now say that the EV market is entering a survival phase.
Analysts estimate that only a small fraction of brands will remain profitable in the long term.
Others will be acquired, merge or disappear entirely.
Big, well-financed companies with strong tech, global networks, or leading branding — like BYD and Huawei-backed Seres — are in much better shape.
Some EV makers are also looking abroad to survive. Increasing exports and local partnerships overseas give them access to new customers and higher-margin markets.
What this means for car buffs
If you’re tracking global EV trends, this shake-out matters:
-- Fewer Chinese EV brands could mean steadier quality as only the strongest survive
-- Global EV prices may stabilise after years of steep discounts
-- International expansion will grow, with Chinese EVs pushing into Southeast Asia, Europe, and beyond
-- Consumers benefit from better tech, not just incentives — forced competition can spark innovation
E-Vroooom’s views
The road ahead
China’s EV boom hasn’t ended — it’s evolving. Next year will see a tough test for many makers, but those that adapt could emerge stronger and more competitive internationally.
Like any industry shift, this Chinese shake-out isn’t just about losses and closures — it’s about reshaping the future of electric vehicles worldwide.
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