Beijing: Demand for lithium batteries in China is expected to fall sharply in the early months of 2026 as electric vehicle sales slow following the end of government incentives, industry officials said.

The head of the China Passenger Car Association said battery demand could drop significantly after a strong rush of purchases toward the end of 2025. Many buyers advanced their vehicle purchases to benefit from subsidies and tax breaks that are set to expire, leaving a weaker market at the start of next year.

Sales of electric passenger vehicles are forecast to decline by at least 30 percent in early 2026 compared with the same period a year earlier. Electric commercial vehicles are also likely to see a downturn as fleet operators pause new orders after incentive driven buying sprees.

The slowdown in the domestic market is expected to hit battery makers, many of whom expanded production capacity in anticipation of continued growth. Industry leaders have warned that manufacturers may need to cut output and manage inventories carefully to avoid oversupply.

Battery exports are unlikely to fully offset the drop in local demand. Shipments to the United States have weakened amid trade tensions and higher tariffs, while growth in exports to Europe has remained modest.

The outlook for the battery sector is also linked to broader economic pressures in China, where industrial profits have been under strain and consumer confidence has remained fragile. Analysts say this environment could continue to weigh on big ticket purchases such as electric vehicles.

Despite the expected short term decline, industry officials say the long term outlook for batteries remains positive. Demand from energy storage projects for power grids and renewable energy systems is growing and could help support the sector beyond the electric vehicle market.

For now, battery producers are being urged to prepare for a volatile start to 2026 as the market adjusts to the post subsidy landscape.