China’s Leading EV Makers Signal Slowdown as Tax Incentives Fade

China’s top electric-vehicle manufacturers — Li Auto (LI) and Nio (NIO) — issued warnings of a potential slowdown in deliveries as Beijing phases out major tax breaks and subsidies that have fueled years of rapid industry growth. The shift marks a move from policy-driven demand to a market-driven environment, affecting several other automakers, including XPeng (XPEV), BYD (BYDDF), and ZEEKR (ZK).

China Scales Back EV Tax Breaks

Beijing has emphasized a future consumption plan focused on “intelligent and connected” NEVs, but has not committed to new subsidies. This leaves automakers navigating:

Rising competition
Accelerated model turnover
Increased safety and supplier scrutiny

New Tax Rules Starting January 1, 2026

EVs move from 100% purchase tax exemption → 50% exemption
Benefit capped at RMB 15,000 per vehicle through 2027 (previously RMB 30,000)
Further cuts to incentives may follow

Li Auto (LI): First Annual Decline Looms

Li Auto expects Q4 deliveries of 100,000–110,000, a Y/Y decline up to 37%.
Key details:

2025 unit sales may fall below 2024 levels
Deliveries through October: 328,916, down 16% YTD
Q1 2026 deliveries expected to drop when EV sales tax cuts take effect

This marks the company’s first significant reversal after years of breakout growth.

Nio (NIO): Lower Guidance Despite Stronger Q3 Results

Nio reported:

Higher Q3 revenue
Narrower net loss

But it cut Q4 sales guidance to 120,000–125,000 units, down from 150,000, citing:

The rollback of local trade-in subsidies in various cities
Weaker consumer incentives heading into 2026

Industrywide Impact

Other Chinese EV players expected to be affected:

XPeng (XPEV)
BYD Company (BYDDF)
ZEEKR Intelligent (ZK)

With incentives fading, competition intensifying, and macro uncertainty rising, China’s EV sector faces one of its most challenging transition periods in years.