China’s Automotive Industry 2026: The Future Has Arrived

The Battle for Orders Begins

Industry insiders widely agree: “2026 will be a year of hardship—the fierceness of competition will be right in our faces.”

At present, the auto market is in its final sprint of the year. “How much we lose is not as important as how much we can sell,” reflects the sentiment of many automakers. Behind this lies a race for survival, as policy incentives gradually fade away.

Exchanging profit for orders—all just to “stay at the table.”

The year-end “battle for orders” is not only about boosting annual sales but also about securing a footing for survival in 2026. Everyone knows that with subsidies tapering off, the real test is just beginning.

Data reveals that the automotive industry’s profit margin has dropped from 7.8% in 2017 to 4.3% in 2024, hovering around 4.4% in the first ten months of this year. Compared to the 10.2% margin during the industry’s golden period in 2012, profitability has nearly shrunk by 60%. Lei Jun’s candid remark at the launch of Xiaomi’s electric vehicle—that the company loses about ¥60,000 per car sold—does not seem exaggerated.

Price cuts have not only squeezed profits but also made it difficult for most automakers to achieve their annual sales targets.

By November, only a handful of smaller new-energy carmakers had met their annual goals ahead of schedule. The vast majority face significant shortfalls in target achievement. Compared to the confidence at the start of the year, year-end anxiety has thickened the atmosphere with a palpable sense of intensity.

BYD revised its annual sales target down to 4.6 million units. With 4.18 million vehicles sold from January to November, it needs to sell 420,000 in December alone—a daunting task. Chery’s target of 3.26 million units stands at 2.56 million achieved so far. Nio has reached less than 61% of its 460,000 target, while Xpeng has attained only 49% of its ambitious 1-million goal.

These stark and direct figures suggest that “this year may be the best of the coming years” is likely more than just an empty saying.

The “Order Battle” Unfolds

Difficult times may well begin in 2026.

A common view is that “the elimination race starts in 2026.” Experts even state bluntly that 2026 will be a “deep winter” for China’s automotive industry.

In fact, the chill has been felt since December this year.

First, the of policy subsidies has led to weak growth momentum. By November, national applications had exceeded 11.2 million vehicles, driving sales worth ¥2.5 trillion. Entering the fourth quarter, local subsidies have tightened, with many regions limiting issuance and application windows. The stimulating effect of policies weakened noticeably in November.

Up to 80% of dealers held a pessimistic view of November’s market performance, generally considering it below expectations. Many reported that December has been sluggish, with poor sales mainly due to the withdrawal of national and local subsidies coupled with the cancellation of high rebates and incentives in the latter half of the year. The phenomenon of “old cars traded in, but new cars not purchased” has become increasingly common.

Secondly, policy fluctuations regarding the purchase tax on new energy vehicles have introduced instability. According to a joint announcement by the Ministry of Industry and Information Technology, the Ministry of Finance, and the State Taxation Administration, from January 1, 2026, to December 31, 2027, the purchase tax on new energy cars will be halved. This means the full exemption period is entering its final countdown month, marking the end of a decade-long policy benefit cycle.

To compete for existing orders, over 20 automakers—including Nio, Zeekr, Xiaomi, and Aito—have introduced “purchase tax protection” policies, committing to cover the tax difference for customers who place orders before year-end for delivery next year, with protection amounts reaching up to ¥15,000. Tesla has also re-ignited year-end promotions with offers like “0% interest for five years + insurance subsidies.”

The ¥15,000 upper limit covers the purchase tax difference for mainstream models priced between ¥100,000 and ¥300,000—the very segment where new energy and traditional fuel vehicles compete most fiercely. Previously, the full exemption was a key advantage for new energy cars against fuel-powered automobiles. Now, with the tax halved, this pricing weapon has been somewhat blunted.

Thus, the “battle for orders” unfolds as anticipated. Everyone is sprinting; everyone is losing profit. Yet it hardly seems to matter, because all understand one thing: “This year’s task is not to profit, but to stem the bleeding. Orders mean cash flow, and cash flow means staying in the game.”