China’s domestic demand for lithium batteries is expected to decline sharply in early 2026 as new energy vehicle (NEV) sales slow, according to the head of the China Passenger Car Association (CPCA). The downturn is likely to follow a strong finish to 2025, driven by policy changes and weakening consumer incentives, the industry group said.
Cui Dongshu, secretary-general of the CPCA, said in a post on his personal WeChat account, as cited by CNEVPOST, that battery manufacturers are likely to cut production or take temporary shutdowns in response to the anticipated demand drop. He attributed the expected slowdown primarily to changes in China’s vehicle purchase tax policy, which are forecast to reduce passenger NEV sales by at least 30% in early 2026 compared with the fourth quarter of 2025.
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Cui added that commercial NEV sales were pulled forward into late 2025 as buyers rushed to take advantage of year-end subsidies and favorable tax treatment, creating a high base effect that will weigh on early 2026 demand.
While China’s NEV exports are expected to remain relatively resilient, he said they are unlikely to provide sufficient support to offset domestic weakness. Battery shipments to the United States, in particular, have fallen sharply this year, limiting external demand growth.
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Data from the CPCA show that China’s power battery sales for passenger vehicles reached 57.1 gigawatt-hours (GWh) in November, up 13% year-on-year, slowing from a 46% increase a year earlier and a 34% rise in November 2023. From January to November, cumulative sales totaled 478.7 GWh, up 23% year-on-year, down from a 37% increase over the same period last year.
The outlook has been further clouded by the suspension of NEV trade-in subsidies in several regions and an upcoming adjustment to the purchase tax regime, which will see the current exemption replaced by a 5% levy starting next year.