Nio founder, chairman and CEO William Li has warned that China’s domestic auto market could experience a sharp decline in retail vehicle sales this year, even as the electric vehicle maker continues to target strong growth and sustained profitability.
Speaking at the China Auto Chongqing Summit on June 13, Li said China’s automotive industry has entered what he described as the most intense phase of competition in its history.
China’s auto market faces significant contraction
Li forecast that domestic retail vehicle sales could decline by between 15% and 20% in 2026 as the industry transitions from a period of rapid expansion to a mature replacement-driven market.
According to Li, automakers should abandon expectations of a near-term market recovery.
“The auto industry has entered the most brutal final stage of competition,” Li said.
He noted that China’s vehicle market is no longer driven primarily by new buyers but increasingly by replacement demand, creating a more challenging environment for manufacturers.
Retail sales continue to weaken
Li pointed to recent market data as evidence of the industry’s difficulties.
According to his remarks, domestic auto retail sales declined 19.5% year-on-year during the first five months of the year.
The slowdown reportedly intensified in June, with retail sales during the first days of the month falling by more than 22% compared with the same period a year earlier.
Nio maintains aggressive growth targets
Despite the broader market weakness, Li reaffirmed Nio’s expectation of achieving annual vehicle sales growth of between 40% and 50% in 2026.
The target is consistent with guidance provided earlier this year when the company celebrated production of its one millionth vehicle.
Recent delivery figures have supported the company’s optimistic outlook.
Between January and May, Nio delivered 150,526 vehicles, representing a year-on-year increase of 68.7%.
Profitability improves
Nio has also shown signs of improving financial performance following years of heavy investment.
The company reported an operating profit of 1.25 billion yuan ($184.8 million) in the fourth quarter of 2025.
In the first quarter of 2026, Nio remained profitable, posting operating profit of 68 million yuan.
The results mark a significant milestone for the company as it works toward sustainable long-term profitability.
Heavy investment in technology and infrastructure
Li stressed that success in the current market environment requires long-term commitment rather than short-term tactics.
“The auto industry is a marathon on a muddy road,” Li said.
“There are no miracles or shortcuts to quick victories.”
To strengthen its competitive position, Nio has continued investing heavily in research, development and infrastructure.
According to Li, the company has invested more than 68.8 billion yuan in research and development over the past 11 years.
Investment in charging and battery-swapping infrastructure has exceeded 20 billion yuan.
Multi-brand strategy gaining traction
Li also highlighted the growing contribution of Nio’s sub-brands.
The company’s premium compact EV brand Firefly has reportedly emerged as a strong performer within its segment.
According to Li, Firefly sales have exceeded the combined sales of Mini and Smart in the premium compact vehicle category since its launch.
Demand continues to outpace supply, with customers still facing delivery wait times after placing orders.
Onvo and ES8 support expansion
Nio’s broader portfolio is also contributing to market share gains.
Li said the flagship ES8 has led China’s large SUV segment for six consecutive months.
Meanwhile, the company’s mass-market Onvo brand is seeing strong interest in its L60 and L90 models, helping Nio expand into additional customer segments.
Pure electric adoption continues to rise
Li also pointed to accelerating adoption of battery-electric vehicles in China.
According to figures cited during the summit, new energy vehicles accounted for 62.9% of China’s vehicle market in May.
Within the overall powertrain mix, pure electric vehicles achieved a penetration rate of 42.2%.
Li argued that the shift toward battery-electric mobility is irreversible.
Infrastructure driving EV growth
The Nio chief executive said expanding charging and battery-swapping networks are making electric vehicles increasingly attractive to consumers.
As infrastructure coverage improves, the ownership experience for EV drivers continues to improve, supporting broader adoption of fully electric vehicles.
While Li expects China’s automotive market to remain under significant pressure in the near term, he believes companies with strong technology, differentiated products and robust infrastructure networks will be best positioned to emerge successfully from what he describes as the industry’s ongoing consolidation phase.
Source: CnEVPost
