China’s Lithium Battery Demand to Slump in 2026 – Car Association Forecast

Shanghai, China — Demand for lithium batteries in China, the world’s largest producer and exporter of battery cells for electric vehicles (EVs) and energy storage, is expected to fall sharply in early 2026, the head of a major automotive industry body has said, signaling a potential market slowdown following years of rapid growth.

Cui Dongshu, Secretary General of the China Passenger Car Association (CPCA), warned in a social media post that demand for new‑energy batteries — primarily lithium‑ion cells used in EVs and storage — is likely to decline “drastically” in early 2026 compared with the final quarter of 2025. 

He urged China’s battery makers to prepare for a sharp slowdown, suggesting they consider cutting production or taking temporary breaks to adjust to the expected market contraction. 

Two main factors are driving this anticipated slump:

1. EV Sales Cooling Off:
After strong growth in 2025, domestic EV sales in China are expected to fall at least 30% in early 2026, starting from the fourth quarter of 2025, as the government phases out tax incentives and purchase subsidies that helped fuel EV adoption this year.

2. Export Slowdown:
While China remains a key global exporter of lithium batteries, battery shipments abroad are showing uneven trends. Exports to the European Union — China’s largest overseas battery market — grew modestly by about 4% in 2025, but exports to the United States declined sharply by about 9.5%, suggesting weaker external demand cannot fully offset domestic slowdown. 

Impact on Battery Makers

Industry leaders say a significant drop in demand will have broad effects on China’s battery manufacturing sector, which dominates global production. Companies such as Contemporary Amperex Technology Co. Ltd. (CATL) and EVE Energy — two of China’s largest battery makers — could face challenges if both domestic orders and export volumes weaken. 

Because batteries are the most expensive and critical components of EVs, a slowdown in battery demand has direct implications for automakers, suppliers, and related industries. 

Industry Commentary and Data Trends

China has long led the world in lithium battery manufacturing thanks to massive capacity expansion and technological leadership. However, the EV market has seen temporal shifts influenced by policy changes, economic cycles, and evolving consumer behaviour. 

A shift away from incentives toward a more market‑driven growth phase may lead to short‑term volatility as companies and consumers adjust. While EV penetration and long‑term demand remain strong, the industry is now preparing for a near‑term adjustment period. 

Broader Implications

• For Chinese Manufacturers: The expected slowdown could prompt production adjustments, cost‑reduction strategies, and a renewed focus on innovation to maintain competitiveness. 

• For Global Markets: Reduced export growth to major regions such as the U.S. may encourage Chinese battery makers to diversify overseas partnerships or develop new markets. 

• For EV Adoption: Consumer demand in China has been heavily influenced by subsidies; policymakers may need to consider new measures to sustain EV growth without incentives.