On December 28, 2025, the China Association of Automobile Manufacturers stated that at the beginning of 2026, there will be a significant decline in domestic demand for new energy lithium batteries compared to the fourth quarter. Battery production companies are expected to reduce production and take holidays. One of the main reasons is the drastic decrease in battery exports to the United States in 2025, which has been difficult to recover from. The surge in demand for electricity and energy storage brought by AI in the United States has not benefited Chinese battery manufacturers.
The China Association of Automobile Manufacturers (CPCA), established in 1994 and headquartered in Shanghai, is a branch institution of the China Automobile Dealers Association. It is comprised of enterprises in the automotive manufacturing, sales, and service industries, and plays a crucial role as a research institution in the automotive industry.
Cui Dongshu, Secretary-General of the China Association of Automobile Manufacturers, stated on December 28 that the demand for new energy lithium batteries in the fourth quarter of 2025 was severely sluggish. As a result, existing production plans are being significantly reduced, leading to expectations of production cuts and holidays for battery manufacturing companies to correspond to demand fluctuations. The downturn in demand is directly impacting leading battery companies such as CATL and EVE Energy.
Cui Dongshu anticipates that at the beginning of 2026, there will be a cliff-like drop in domestic demand for new energy lithium batteries, leading to production cuts and holidays for battery manufacturing companies to match demand fluctuations. The reasons for this decline include five aspects:
Firstly, due to policy adjustments in vehicle purchase taxes, the sales volume of new energy passenger vehicles at the beginning of 2026 is expected to decrease by at least 30% compared to the fourth quarter.
Secondly, after a rush for subsidies and tax exemptions at the end of the year, commercial new energy vehicles will inevitably face a significant decrease at the beginning of the year.
Thirdly, although exports of new energy passenger vehicles will remain relatively strong in early 2026, the demand for batteries from independent suppliers will not increase significantly.
Fourthly, the energy storage demand in the United States has not significantly boosted domestic battery exports. The sharp decline in battery exports to the United States in 2025 is unlikely to recover in 2026.
Fifthly, the tender price for domestic energy storage is significantly lower than 300 yuan per kilowatt-hour, and the demand for price increases will inevitably weaken. Additionally, automotive batteries cannot share the cost burden for energy storage losses.
Export markets cannot compensate for domestic demand shortfalls. In 2025, lithium battery exports to the European Union (the largest overseas market) increased by only 4% compared to the previous year, while exports to the United States plummeted by a significant 9.5%.
It is worth noting that Cui Dongshu mentioned that China’s drastic reduction in battery exports to the United States corresponds to the total scale of exports to Southeast Asia, equivalent to the third largest market. From 1.87 billion USD last year, exports dropped to 1.04 billion USD this year, a sharp 45% decrease, with export prices also dropping by 22%. This reflects the surge in demand for electricity and energy storage brought by AI in the United States, which has not benefited Chinese battery manufacturers.
UBS analysts have warned that U.S. taxation restrictions for investments in “foreign entities of concern” are exacerbating industry risks.
Currently, China’s main export destinations for lithium batteries are the European Union, Southeast Asia, Oceania, the Middle East, among others.