Business

China Lithium-Ion Battery Demand Expected to Fall in 2026
By Reuters | 28 Dec, 2025

An expected drop in domestic Chinese EV sales following a year of surging growth, couple with the expiration of US EV tax credits, is expected to cut demand for batteries of CATL and EVE Energy.

Demand for Chinese lithium batteries will likely slump in early 2026 due to an expected tumble in domestic electric vehicle sales and slowing battery exports, the secretary general of China's passenger car association said on Sunday.

"Looking into 2026, demand for new energy batteries will drop drastically from the end of this year, so battery makers should cut production and take some rest to cope with the fluctuations," Cui Dongshu, the industry body's secretary general, said in a personal social media post. 

China is the global leader in battery technology manufacturing and exports, and is benefiting from a worldwide boom in demand for batteries used in EVs and power networks.

A big drop in demand will hurt battery makers including Contemporary Amperex Technology Ltd (CATL) and EVE Energy.

Cui said green passenger vehicle sales will fall at least 30% early next year, from the fourth quarter, as tax incentives for car purchases are being phased out. 

In addition, electric vehicles for commercial use will "definitely" slump in early 2026 after buyers rushed to buy vehicles by year-end for subsidies and tax breaks, Cui said.

The loss in domestic demand is unlikely to be offset by exports, he said.

China's lithium battery exports to the European Union, its biggest overseas market, rose 4% in 2025 from a year ago, while exports to the United States tumbled 9.5%.

The drop in U.S.-bound exports suggests rising demand for energy storage from the U.S. artificial intelligence boom is not lifting demand for Chinese batteries, Cui said. 

UBS analyst Yishu Yan said this month that Chinese manufacturers face risks from U.S. restrictions on projects receiving investment tax credits that involve designated "foreign entities of concern".

(Reporting by Shanghai newsroom; Editing by Sonali Paul)