China’s lithium battery sector is bracing for a significant downturn in demand in early 2026 as domestic electric vehicle (EV) sales weaken and battery exports slow, industry officials have warned. The secretary general of the China Passenger Car Association (CPCA), Cui Dongshu, said in a personal social media post that demand for “new energy batteries” the core technology used in EVs and energy storage is expected to fall drastically from the end of 2025 into early 2026.
Cui forecast that green passenger vehicle sales will drop by at least 30% in the early months of 2026 compared with the final quarter of this year, attributing the decline to the phasing out of tax incentives and purchase subsidies that had driven much of the recent EV market growth. What’s more, he said electric vehicles for commercial use will “definitely” slump, after buyers rushed to complete purchases before the year‑end to qualify for incentives and tax breaks.
China remains a global leader in battery technology manufacturing and exports, and its firms have benefited from strong international demand for batteries used in EVs and power networks. However, the anticipated drop in domestic consumption is unlikely to be fully offset by exports, Cui said. Data for 2025 shows that lithium battery exports to the European Union China’s largest overseas market rose by about 4%, while exports to the United States fell by around 9.5%, suggesting that even surging demand for energy storage linked to the U.S. artificial intelligence boom has not significantly lifted Chinese battery shipments to the U.S. market.
The projected slump in demand could hurt major battery makers such as Contemporary Amperex Technology Ltd (CATL) and EVE Energy, both of which have expanded capacity in recent years to serve booming EV markets at home and abroad.
Analysts also note that Chinese manufacturers face additional headwinds from U.S. restrictions on projects receiving investment tax credits if they involve designated “foreign entities of concern,” a regulatory challenge that could further cool overseas investment and collaboration.
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