What's happened
Global EV sales hit record highs in September, driven by Chinese consumer interest and European popularity. Meanwhile, China’s EV growth is expected to slow in 2026 due to subsidy reductions, with domestic automakers expanding internationally and challenging Tesla in premium segments. The Chinese government aims to double EV charging capacity by 2027.
What's behind the headline?
Market Dynamics and Policy Impact
The Chinese EV market is at a pivotal point. While sales surged last year, the expiration of subsidies and tax incentives will likely cause a demand slowdown in 2026, with forecasts indicating a potential 3-5% decline in overall vehicle sales. The government’s plan to double charging capacity by 2027 aims to address infrastructure gaps, fostering future growth.
Industry Shifts and Competitive Strategies
Chinese automakers are shifting focus towards premium models with longer ranges and more spacious designs to challenge Tesla’s dominance. Export strategies are gaining momentum, with BYD projecting 20% of sales outside China, supported by improved logistics and new models.
Challenges and Opportunities
Overcapacity remains a concern, with production capacity exceeding actual sales, leading to aggressive discounts and squeezed profit margins. However, export expansion and higher-margin overseas sales could significantly boost profitability, especially if margins increase from 5,000 to 20,000 yuan per vehicle.
Broader Implications
The slowdown in China’s EV growth reflects a broader global trend where demand is becoming more dependent on economic conditions and consumer confidence. The end of subsidies will test the resilience of the market and the ability of automakers to innovate and adapt to new policy environments.
Future Outlook
China’s EV industry will likely face a transitional period in 2026, balancing subsidy-driven demand with organic growth driven by infrastructure improvements and product innovation. The global EV market will continue expanding, but China’s internal growth may moderate, emphasizing export and premium segments.
What the papers say
The South China Morning Post reports that Chinese EV sales hit a record last month, driven by consumer interest and European popularity, but forecasts a slowdown in 2026 due to subsidy reductions. It also highlights China's plans to double charging capacity by 2027 and the expansion of Chinese automakers abroad.
Bloomberg notes that despite global EV market growth, some Chinese automakers like Li Auto and BYD are experiencing declining deliveries and are shifting focus to exports and premium models to maintain profitability. The article emphasizes the challenges posed by expiring subsidies and overcapacity, but also highlights export opportunities.
Both sources agree that China's EV market is at a crossroads, with government policies and international expansion strategies shaping the future landscape. The South China Morning Post provides a broader macroeconomic context, while Bloomberg offers detailed industry-specific insights.
How we got here
China's EV market has experienced rapid growth, with sales reaching a record in September 2025. Government subsidies and tax incentives have historically driven demand, but their expiration is expected to slow growth in 2026. Major Chinese automakers are expanding abroad, aiming to increase export margins and challenge global competitors like Tesla.
Go deeper
Common question
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Why Are EV Sales Slowing in China?
China's electric vehicle market has experienced rapid growth, reaching record sales in September 2025. However, experts predict a slowdown in 2026 due to subsidy reductions and market saturation. This shift raises questions about the future of Chinese EV manufacturers, government policies, and global competition. Below, we explore the key factors influencing this trend and what it means for consumers and industry players alike.
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