It’s been another frenetic year in China’s electric vehicle market. Xiaomi continued its stunning rise from smartphone maker to EV darling, while market leader BYD’s runaway growth stalled out.
Regulatory scrutiny increased, with policymakers focusing their attention on everything from the long-running price war, zero-mileage used cars and flush door handles.
Technology advances continued apace, with BYD and CATL going head-to-head to develop ultra-fast charging batteries and carmakers increasingly making advanced driver-assistance systems more widely available.
So what does 2026 have in store? Here are five key things to watch:
Can BYD Bounce Back?
BYD started this year with a target to sell 5.5 million vehicles, building on last year’s record 4.25 million. But after a strong start, sales have tailed off — particularly after steep price cuts invoked the wrath of government regulators — forcing the company to lower its objective for this year. BYD’s earnings have declined the past two quarters, and the stock has slumped around 36% from its May peak.
The question is whether this ends up being just a blip for China’s biggest EV maker, or the start of a tougher phase as it faces increased competition from the likes of Geely and Xiaomi, as well as heightened regulatory scrutiny. Analysts are still bullish, with 34 rating the stock a buy, compared to just three sells, according to data compiled by Bloomberg.
Deutsche Bank analysts see BYD’s ultra-fast charging batteries, God’s-Eye driver-assist features and new models helping drive sales to 5.6 million units in 2026. Chairman Wang Chuanfu blamed BYD’s slowdown in domestic sales on a lack of compelling technological upgrades and said during a shareholder meeting last week that breakthroughs are ahead in the years to come.
Competition Curbs
While China’s auto industry has long been the beneficiary of government support, the tables turned somewhat this year as part of the country’s anti-involution drive pushing back against aggressive price wars and industry overcapacity.
In June, the chiefs of major carmakers were summoned to Beijing and given a dressing down for their “rat race competition.” The government also took aim at the practice of offloading unsold cars into the secondhand market while boosting sales figures.
A continued hard line from Beijing could act as a damper on the EV market in 2026. The government has yet to renew its trade-in subsidy that encourages drivers to swap older cars for EVs or more fuel-efficient models. Tax rebates are also set to be wound back next year ahead of their total abolition in 2027, as policymakers look to wean the sector off state support.
The uncertain fate of the subsidies has had the effect of pulling car purchases into the final months of this year and could mean a rocky start to 2026.
Xiaomi’s Next Act
Tech giant Xiaomi has enjoyed a stellar year with its EVs, consistently beating internal sales targets — it now expects to deliver 400,000 vehicles this year — and reaching profitability in less than half the time it took Tesla.
But there are constraints to the company’s growth. It currently has just two models — the SU7 sedan and YU7 midsize sport utility vehicle — and with just one factory in Beijing, there’s a lengthy wait time for its EVs. That should ease with a new production line, speeding delivery for some trims.
For the smartphone and home-device maker’s next act, it’s reportedly working on a full-size sport utility vehicle to compete with the likes of Nio and Li Auto in the highly competitive premium EV segment. The new model is key to bringing fresh impetus to Xiaomi’s small lineup that also may need a refresh to stay competitive.
Global Domination
Given the feverish competition at home, Chinese automakers are accelerating their push into global markets. BYD has been at the forefront, opening factories in Brazil and Thailand, with Hungary and Turkey to follow.
The diversification is paying off, with the stock jumping last week after the company reported that exports climbed even as overall shipments fell in November.
BYD is aiming for export sales of 1.6 million vehicles in 2026, up from around 1 million this year, according to Citi analysts. Geely is targeting 600,000 international sales next year, which would be up to 80% higher than 2025.
Even with the key North American market effectively closed off due to tariffs, Europe, South America, Southeast Asia, Australia and even the Middle East are proving to be fertile ground for Chinese automakers.
Battery giant CATL is also pushing ahead with its overseas expansion efforts in a bid to localize production and be closer to customers, with a key factory in Hungary to come on line next year.
Make-or-Break for Nio
Nio faces a critical year, with founder William Li’s goal to reach profitability this quarter looking like a stretch. The company was once the rising star of Chinese EV startups, taking on Tesla in the premium end of the market and building a cult-like following with its clubby Nio Houses and showy investor days.
It has failed to live up to the early promises, racking up $20 billion in losses and counting. The stock is down more than 90% from the heady peak of 2021, when the automaker was valued at almost $100 billion. Sales are hovering around 40,000 a month, a fraction of market leaders.
Nio heads into 2026 with limited visibility of its sales performance, according to Citi analyst Jeff Chung. As more rivals start to leapfrog Nio in deliveries, it adds pressure to its finances and finite cash reserves.
Renault supports France’s call for EVs sold in Europe to contain locally sourced parts, but is warning against making the content requirements too onerous. Electric-car batteries are still mostly made outside Europe and are the most expensive part of an EV, Chief Strategy Officer Josep Maria Recasens said in an interview. Rather than single out EVs, the EU should impose a 60% local-content rule across all passenger vehicle types, including combustion models, he said.
