10:43 31-12-2025

China faces 2026 lithium-ion battery demand drop as subsidies fade

China could see a sharp drop in demand for lithium-ion batteries as early as the beginning of 2026. The secretary general of the China Association of Automobile Manufacturers warned in indirect terms that the first quarter decline could be in double digits, linking the outlook primarily to the expiration of government subsidies that have been propping up transport electrification.

In 2025, the battery market showed steady growth: major companies actively stocked cells for electric cars and commercial vehicles. But momentum may fade right at the start of the following year, as incentives roll off and some corporate buyers defer orders. Exports are unlikely to be a safety valve this time either, with Western countries scaling up their own battery production and dialing down dependence on China.

Even market leaders, including CATL and other big suppliers, are not immune. At current output levels, they risk oversupply and falling prices unless strategies are adjusted. That could filter through to EV price tags, all while competition with conventional vehicles remains intense.

China’s market has long been a global engine of electrification, yet 2026 could prove to be an inflection point. Manufacturers will need to strike a balance between excess capacity and softer demand, and buyers should be prepared for price swings. In such phases, companies tend to favor tighter planning and sharper pricing moves over aggressive expansion—a pragmatic pivot that fits the moment.