Electric Car Sales Slow, Chinese Battery Makers Asked to Cut Production

JAKARTA - China's battery industry must prepare for a "cooling" phase after years of rapid progress on the green track.

This is because demand for lithium batteries from China is predicted to experience a sharp decline in early 2026. This condition is triggered by a sharp decline in sales of electric vehicles (EV) in the Chinese domestic market as well as slowing export figures.

Secretary-General of the China Passenger Car Association (CPCA), Cui Dongshu, gave a stern warning to industry players. Through a post on his personal social media, he suggested that battery manufacturers start to draw up production braking strategies.

"Looking at 2026, demand for new energy batteries will drop drastically compared to the end of this year. Therefore, battery makers must cut production and 'take a break' to deal with these fluctuations," said Cui, quoted from Reuters, Monday, December 29.

Domino Effect of the Termination of Tax Incentives

The main reason for this downward prediction is the end of various government stimuli. Cui projects that sales of environmentally friendly passenger vehicles will fall at least 30 percent by early next year compared to the fourth quarter of this year. This is due to the gradual removal of tax incentives for car purchases.

Not only private vehicles, the electric commercial vehicle sector is also ensured to be sluggish. Buyers previously flocked to make transactions at the end of the year in order to pursue subsidies and tax relief before the expiration of the period.

Export Market No Longer Reliable?

Until now, China has been a global leader in battery technology and manufacturing, reaping huge profits from the global EV trend. However, this time the weakening of domestic demand is not expected to be covered by the export market.

Data shows contrasting export performance in two major markets, namely the European Union still recorded a slight growth of 4 percent in 2025. Meanwhile, the United States experienced a sharp decline of 9.5 percent.

Interestingly, the surge in energy storage needs due to the boom in Artificial Intelligence (AI) in the United States did not have a positive impact on batteries from China. This is suspected to be related to geopolitical and regulatory factors.

UBS analyst Yishu Yan said China's manufacturing now faces a major risk due to US restrictions on projects receiving investment tax credits if they involve "foreign entities of concern".

If this prediction comes true, the world's battery giants such as Contemporary Amperex Technology Ltd (CATL) and EVE Energy are sure to feel the impact directly. This decline in demand will force these major companies to reassess their production and expansion targets in the coming years.