Numerous Chinese electric vehicle brands might face collapse within the upcoming year | Carscoops

      Selling vehicles is one thing, but achieving profitability without substantial incentives is becoming increasingly difficult for many of China's electric vehicle (EV) manufacturers as governmental support begins to wane.

      Only a small number of Chinese EV brands have managed to become profitable, and as many as 50 struggling EV companies may reduce their operations by 2026. The tax benefits for EVs in China are either ending or being significantly cut.

      Chinese electric vehicles are rapidly gaining traction in global markets, driven by soaring demand and strong governmental support. In November alone, China’s EV exports surged by 87 percent compared to the same month last year. However, despite this swift growth, signs of trouble are emerging.

      The year 2026 appears to be a pivotal moment for China's EV industry, with a significant shakeout anticipated that could impact numerous underperforming manufacturers.

      Deliveries of new vehicles in China are projected to fall by as much as 5 percent next year, marking the biggest decline since 2020, partly due to reduced government backing and the industry’s persistent overcapacity.

      This assessment comes from the South China Morning Post (SCMP), a Hong Kong-based English-language newspaper owned by Alibaba Group, which reports that around 50 of China's unprofitable EV manufacturers may have to downsize or close their operations in 2026.

      “Time is not on the side of those companies whose vehicles fail to attract young drivers,” stated Qian Kang, who operates a factory producing automotive printed circuit boards. “For most unprofitable EV assemblers, next year’s results will be crucial.”

      Upcoming policy changes and market dynamics will play a significant role in shaping the future. In January, Beijing is likely to decide whether to extend the 20,000 yuan (approximately US$2,900) EV trade-in subsidy. Meanwhile, the existing 10 percent purchase tax exemption is set to expire at the end of this year, with a reduced rate of 5 percent applying from January until the full tax returns in 2028.

      While the price competition among Chinese manufacturers has made affordable EVs accessible to many car buyers, it has undermined the profitability of several companies. Coupled with substantial investments in research and development and a pressing need among brands to build extensive model portfolios, it is no surprise that very few carmakers have achieved profitability.

      “The era of easy fundraising for China's EV makers and major automotive component suppliers is over,” remarked angel investor Yin Ran. “The game now is about survival, with profitable manufacturers poised to succeed, while those that are not profitable risk running out of funds soon.”

      Only a few companies have managed to endure the challenges. Profitable major players such as BYD, Seres, and Li Auto are exceptions and are expected to ramp up their international efforts to find new growth avenues. Research from AlixPartners indicates that only around 10 percent of China’s EV brands will be profitable in the near future.

      Among the few companies receiving new support, Stellantis-backed Leapmotor has secured a significant investment. The state-owned FAW Group is set to purchase a 5 percent stake in the Chinese automaker for 3.74 billion yuan, or $534 million. This makes Leapmotor the first Chinese manufacturer to receive backing from a state-owned entity and will assist in its planned expansion.

      Leapmotor aims to deliver 1 million vehicles by 2026, which would position it as China's third-largest EV maker, following BYD and Geely. Through the first 11 months of 2025, Leapmotor delivered 536,132 vehicles.

      “Leapmotor aims for annual deliveries of 4 million units within the next decade,” stated Zhu Jiangming, founder and CEO of Leapmotor, in an interview. “Leapmotor will enhance our value through refining our production processes, while providing customers with the best driving experiences.”