China’s lithium battery demand is forecast to plunge in early 2026 amid falling EV sales, expiring tax incentives, and slowing exports. Read more now.
According to Cui Dongshu, secretary‑general of the China Association of Automobile Manufacturers, demand for domestically produced lithium batteries could tumble sharply at the start of 2026. The dip is tied to a projected slump in local electric‑vehicle (EV) sales and a slowdown in battery exports.
Cui warned that from 2026 onward, ‘new energy battery demand will decline sharply from the end of this year’, urging manufacturers to trim output and ‘take a breather’ to weather market volatility. He shared these remarks on his personal social‑media account.
Why demand is set to fall
China currently leads the world in lithium‑battery production and export, benefitting from a boom in EV adoption and grid‑storage projects. Nevertheless, the upcoming demand contraction threatens giants such as CATL and EVE Energy.
Domestic sales of green‑energy passenger cars are expected to drop at least 30 % in the first quarter of 2026 compared with Q4 2025, as tax rebates and other subsidies are phased out. Commercial‑vehicle EV sales are also likely to plunge after buyers rushed to purchase before the end‑of‑year incentives expire.
Cui stressed that the domestic shortfall is unlikely to be offset by overseas markets.
Export outlook
In 2025, China’s lithium‑battery exports to the European Union – its largest foreign market – rose modestly by 4 % year‑on‑year. By contrast, shipments to the United States fell 9.5 %, reflecting weaker demand for energy‑storage systems linked to the AI surge in the U.S.
Analyst view
UBS analyst Yishu Yan echoed the cautious tone, noting that Chinese battery makers face heightened risk from U.S. restrictions on projects involving ‘foreign entities of concern’ that could limit access to investment‑tax credits.
Industry watchers will monitor how quickly manufacturers adjust production volumes and whether policy tweaks can soften the looming downturn.