China EV Sales Slow, Smaller Brands Face Exit

China’s electric car boom is about to hit a reality check, and for many EV brands, 2026 could be make-or-break

Roughly 50 Chinese EV brands are now under pressure to either scale down fast or exit the market altogether, as China is expected to see its first car sales decline since 2020.

The problem isn’t demand alone. China has simply built too many cars, and government support is no longer as generous as it once was. Subsidies and tax perks that helped fuel the EV boom are being rolled back, and buyers are starting to feel it.

Right now, EV buyers enjoy a full purchase-tax exemption. But starting January, that changes. A 5% purchase tax will kick in, before rising back to the usual 10% by 2028. 

Beijing has also yet to confirm whether the 20,000 yuan trade-in subsidy will be extended, a decision that could heavily influence next year’s sales.

Big banks are already lowering expectations. Deutsche Bank anticipates China’s vehicle deliveries to fall 5% in 2026, while JPMorgan sees a 3% to 5% drop across both petrol and electric cars. 

Years of aggressive price wars have crushed margins, and massive spending on tech and R&D hasn’t helped balance the books.

At the moment, only a small group of EV makers are actually making money. Names like BYD, now the world’s largest EV producer and Huawei-backed Seres stand out, while many others are still burning cash. 

Investors say the easy funding days are over, and survival now depends on real profits, not big promises.

To stay afloat, many Chinese EV brands are looking beyond China. Exporting cars overseas can dramatically improve margins. On average, local carmakers earn about 5,000 yuan per vehicle at home, but that figure could climb to 20,000 yuan when selling abroad, where prices are higher.

Exports are expected to keep rising. China’s passenger vehicle exports could grow 13% in 2026, adding about 750,000 units to overall sales. It’s not enough to save everyone, but it could give stronger players room to breathe.

Industry experts expect a major shake-up. Only around 15 Chinese EV brands comprising about 10% of the total are likely to be profitable within five years. 

Brands selling fewer than 1,000 cars a month are seen as the most vulnerable, and several Sino-foreign joint ventures with annual sales below 100,000 units could disappear in the coming years.

Even global names aren’t safe. Ford, Mazda and Lincoln all operate China ventures that fall under that threshold, putting them at risk as competition tightens.

Source: SCMP.