China is poised to see a significant drop in demand for its lithium batteries in early 2026, driven by an anticipated decline in domestic electric vehicle (EV) sales and weaker export growth, according to the secretary-general of China’s Passenger Car Association. In a recent social media post, Cui Dongshu warned that demand for new energy batteries will “drop drastically” from the end of 2025, advising battery manufacturers to reduce output and prepare for market fluctuations.
China leads the world in battery manufacturing and exports, supplying cells for EVs and energy storage systems globally. However, a sharp downturn in domestic demand is expected to affect major producers, including Contemporary Amperex Technology Ltd and EVE Energy. Cui forecast a minimum 30 percent decline in green passenger vehicle sales in the first quarter of 2026 compared with the final quarter of 2025, attributing the fall to the gradual removal of tax incentives for buyers.
Commercial electric vehicles are also set to experience a slump after a rush of purchases by the end of this year, driven by subsidies and tax breaks. As these incentives expire, fleet operators are likely to postpone acquisitions, compounding the downturn in domestic battery consumption.
The domestic shortfall is unlikely to be offset by stronger exports. Data for 2025 show a 4 percent rise in China’s lithium battery shipments to the European Union, its largest overseas market, while exports to the United States fell by 9.5 percent. This decline suggests that increased demand for energy storage in the US—spurred by growth in artificial intelligence applications—has not translated into higher purchases of Chinese-made batteries.
Market observers also warn of regulatory headwinds. US restrictions targeting projects eligible for investment tax credits, particularly those involving certain foreign entities, may further complicate Chinese battery manufacturers’ access to the American market.
Source: Business Times Singapore
