Background on China’s Role in the Global Battery Market
China is a global leader in manufacturing and exporting battery technology, capitalizing on the worldwide surge in demand for electric vehicle (EV) and power grid batteries. The country’s prominence in the battery market has been bolstered by its rapid growth in EV production and exports.
Decline in Battery Demand Forecast
According to Cui Dongshu, the Secretary-General of China’s Automobile Passenger Car Association (CPCA), the demand for lithium-ion batteries in China is expected to drop significantly by the end of 2025, leading to a production cutback among battery manufacturers.
“Battery demand for new energy is projected to plummet starting late this year, so battery manufacturers should reduce production and take a breather to cope with the fluctuations,” Cui stated in a personal social media post.
Impact on Major Battery Manufacturers
This sharp decline in demand will adversely affect major battery manufacturers, such as Contemporary Amperex Technology Ltd (CATL) and EVE Energy. Their financial performance is closely tied to the EV market’s growth.
Reasons for the Demand Drop
Cui attributes the anticipated drop in battery demand to two primary factors:
- Decline in EV Sales: The sales of eco-friendly vehicles are expected to fall by at least 30% in early 2026, as tax incentives for purchasing EVs are being phased out.
- Commercial EV Market Slump: Cui predicts that the commercial electric vehicle market will “definitely” decline by early 2026. Buyers rushed to purchase EVs towards the end of 2025 to secure tax subsidies and exemptions, leading to a temporary surge in demand.
Cui also notes that the loss of domestic demand is unlikely to be offset by increased exports.
Export Trends
China’s lithium-ion battery exports to the European Union, its largest overseas market, rose by 4% in 2025 compared to the previous year. However, exports to the United States fell by 9.5%. The drop in US-bound exports suggests that the growing demand for energy storage due to AI advancements is not boosting Chinese battery demand, according to Cui.
Key Questions and Answers
- What is causing the drop in battery demand? The primary reasons are the anticipated decline in electric vehicle sales due to phasing out tax incentives and a temporary surge in commercial EV purchases driven by year-end subsidies.
- Which battery manufacturers will be affected? Major manufacturers like Contemporary Amperex Technology Ltd (CATL) and EVE Energy will be impacted due to their reliance on the EV market’s growth.
- How will export trends influence battery demand? While China’s battery exports to the EU increased, the decline in US-bound exports indicates that growing demand for energy storage related to AI advancements is not driving Chinese battery demand.
