Dozens Of Chinese EV Brands Could Collapse In The Next Year
- Only a few Chinese EV brands have reached profitability.
- Up to 50 struggling EV firms may slash operations in 2026.
- China’s EV tax perks are ending or being sharply reduced.
Chinese electric vehicles are spreading fast across global markets, fueled by booming demand and strong backing from Beijing. In November alone, China’s EV exports jumped 87 percent compared to the same month last year. Yet even with this rapid growth, cracks are starting to show.
The year 2026 is shaping up to be a major turning point for China’s EV sector, with a looming shakeout expected to hit dozens of struggling manufacturers.
Read: China’s Getting Ready To Flood The World With Even Cheaper EVs And PHEVs
Deliveries of new vehicles in China are expected to slip by as much as 5 percent next year, the largest contraction since 2020, due in part to lowered government support and the industry’s history of overcapacity.
Industry at a Crossroads
And this isn’t speculation from outsiders either, but comes from the South China Morning Post (SCMP), a Hong Kong-based English-language newspaper owned by Alibaba Group. The SCMP reports that around 50 of China’s money-losing EV makers may be forced to either downsize or shut down entirely in 2026.
“Time is against those players whose cars cannot impress young drivers,” said Qian Kang, who runs a factory producing automotive printed circuit boards. “For most of the unprofitable EV assemblers, next year’s performance will be critical.”
Policy Shifts and Market Pressure
Much hinges on an upcoming policy decision. In January, Beijing is expected to determine whether the 20,000 yuan (roughly US$2,900) EV trade-in subsidy will be extended. Meanwhile, the current 10 percent purchase tax exemption is set to expire at the end of this year. A reduced 5 percent rate will apply starting in January and remain in place until the full tax returns in 2028.
While the price war among Chinese firms has brought affordable EVs within reach of millions of car buyers, it has eroded many companies’ ability to turn a profit. Combined with significant investments into research and development, as well as urgency among brands to establish large portfolios of models, it’s hardly a surprise that very few carmakers have become profitable.
“The fundraising bonanza surrounding China’s EV makers and key car component suppliers is history now,” angel investor Yin Ran said. “So it will be a game of survival, with profitable carmakers becoming the winners, while unprofitable players face running out of funds soon.”
Few companies have weathered the storm. Profitable big players such as BYD, Seres, and Li Auto stand out as rare exceptions. These firms are expected to intensify their overseas efforts as they look for new growth opportunities. Research from AlixPartners suggests that only about 10 percent of China’s EV brands will be profitable in the coming years.
Leapmotor Gets Cash Injection
Among the handful of companies securing new support, Stellantis-backed Leapmotor has landed a major investment. The state-owned FAW Group has announced it will acquire a 5 percent stake in the Chinese carmaker for 3.74 billion yuan, or $534 million. This makes Leapmotor the first of the nation’s car manufacturers to receive investment from a state-owned group and will help with its planned expansion.
Leapmotor is aiming to deliver 1 million vehicles in 2026. If it achieves this figure, it would be China’s third-largest EV maker, trailing only BYD and Geely. Through the first 11 months of 2025, Leapmotor delivered 536,132 vehicles.
“Leapmotor aims to achieve annual deliveries of 4 million units a year in 10 years’ time,” Leapmotor found and chief executive Zhu Jiangming revealed in an interview. “Leapmotor will strengthen our value through the fine-tuning of our production, while offering customers best [driving] experiences.”