China’s automotive industry is on the brink of a brutal “shakeout,” expected to peak in 2026.
After years of rapid growth fueled by massive government subsidies, the world’s largest electric vehicle market is beginning to show cracks due to overproduction and a prolonged price war. Observers predict that 2026 will not only test sales figures but also mark a true survival battle, forcing dozens of loss-making automakers to exit the market if they cannot stand on their own.
Economists forecast a 5% drop in new vehicle deliveries in China next year, the steepest decline since 2020. This is primarily due to the government’s phased reduction of direct subsidies and the lingering effects of past overproduction. Financial reports reveal that approximately 50 electric vehicle manufacturers are suffering heavy losses and face the risk of downsizing or declaring bankruptcy as capital dries up.
The entire Chinese automotive industry is now holding its breath, awaiting Beijing’s next policy moves, particularly the decision on extending the $2,900 (76.2 million VND) vehicle trade-in subsidy, expected to be announced in January 2026. Additionally, the special consumption tax exemption, which ends this year, will tighten to a 5% preferential rate in the next phase.
The fierce price war among domestic brands has made electric vehicles more accessible to consumers but has also become a double-edged sword, eroding profits. Excessive investment in research and development (R&D) and the race to launch new products have left only a handful of automakers in the black. According to AlixPartners, just 10% of Chinese electric vehicle brands are expected to maintain profitability in the coming years.
Amid this shakeout, the few profitable giants like BYD, Seres, and Li Auto are ramping up exports to seek new growth opportunities abroad. This strategy is seen as a lifeline and a way to expand their survival space as the domestic market becomes increasingly crowded and harsh. The era of easy capital raises is over, giving way to a harsh reality: only companies with optimized supply chains and breakthrough products stand a chance of surviving beyond 2026.
TH (Tuoitrethudo)
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