Chinese electric vehicle makers Li Auto (LI) and Nio (NIO) issued warnings of a potential slowdown in deliveries as China scales back on tax breaks and subsidies that have supported years of growth in the EV industry. The shift in the market from one driven by demand, instead of policy, will also impact XPeng (XPEV), BYD Company (OTCPK:BYDDF), and ZEEKR Intelligent (ZK).
Beijing has outlined a new consumption plan emphasizing “intelligent and connected” NEVs but has not committed to fresh subsidy rounds, adding a layer of uncertainty for automakers already contending with intensifying competition, rapid model turnover, and tighter scrutiny of safety and supplier practices. After January 1, 2026, new energy vehicles (battery EVs, plug-in hybrids, and fuel-cell vehicles) in China lose their full exemption from the government’s vehicle purchase tax and move to a 50% exemption, with the per-vehicle benefit capped at about RMB15,000 through 2027, from a prior level of RMB30,000. Further phasing out of incentives from Beijing could also be on the way.
For its part, Li Auto (LI) expects Q4 deliveries of 100,000 to 110,000 vehicles, which represents a year-over-year decline of as much as 37%. Notably, Li Auto (LI) is expected to see its first decline in volume growth, with 2025 unit sales now likely to fall below 2024 levels. Vehicle deliveries through October were down 16% to 328,916, and the company guided for a substantial dip in the first quarter of 2026 when a sales tax on EVs takes effect, ending the full exemption that had supported demand.
Meanwhile, Nio (NIO) reported higher Q3 revenue and a narrower net loss but cut its Q4 unit sales guidance to 120,000-125,000 vehicles from 150,000, citing the phaseout of local trade-in subsidies in some cities.