The bearish sentiment surrounding China’s electric vehicle (EV) sector has intensified after three premium carmakers reported weak sales for July, further heightening concerns that the market is heading for another brutal price war.
EV makers Xpeng, Nio and Li Auto all reported month-on-month sales declines last month, as demand for intelligent cars weakened amid an economic slowdown in mainland China.
Xpeng delivered 38,027 vehicles to customers in July, down 5.2 per cent from June, as the firm’s four-month streak of increases came to an end.
Nio also saw its monthly sales falter after posting back-to-back increases in May and June, with deliveries down 11.5 per cent month on month at 35,934 in July.
Li Auto, meanwhile, logged its fourth consecutive month of declining sales, as deliveries fell 1.4 per cent from June to 30,468.
Other major Chinese EV players managed to eke out sales upticks in month-on-month terms, but their deliveries were still far lower than during the same period last year.
BYD, the world’s largest EV maker, reported domestic sales of 239,370 units in July, up 4.9 per cent from June but down 9 per cent from the same month in 2025.
Geely, which assembles both petrol and electric vehicles, delivered 143,498 cars to Chinese customers last month, up 4 per cent from June but down a staggering 29.1 per cent from the previous year.
Xpeng, Nio and Li Auto – major rivals to Tesla in China – are particularly vulnerable to weakening demand at home, as they mainly sell their cars on the mainland Chinese market. BYD and Geely have been able to offset weaker domestic sales with soaring exports, as they expand their sales networks across the globe.
“The delivery numbers are in line with expectations by analysts and dealers due to consumers’ lack of buying interest in big-ticket items,” said Steve Shi, a manager at Juchen Auto Trade, a China-based car service firm.
“More would-be buyers are now expecting car brands to offer steep discounts before making their purchase decisions.”
In the first six months of 2026, EV deliveries in mainland China plunged 14 per cent year on year to 4.7 million units, according to data from the China Passenger Car Association (CPCA).
The decline in electric car sales on the mainland, the world’s biggest automotive and EV market, has coincided with Beijing’s paring back of subsidies and tax incentives for new vehicle purchases.
China’s economy also lost steam in the second quarter of the year, with gross domestic product rising 4.3 per cent year on year in the three months ending June – the slowest growth recorded since the end of 2022.
At the end of June, global consultancy AlixPartners said China’s slowing car sales would fuel a brutal price war in the second half of this year, since the mainland’s overall auto industry remained profitable.
In the most bearish forecast for the Chinese car market by an international bank or consultancy, AlixPartners predicted the country’s deliveries would fall by 10 per cent this year to 24.6 million units on the back of a shaky economy and softening government support.
An escalating price war would be particularly damaging for China’s carmakers amid a turbulent global economy, which has already raised raw material costs and squeezed margins, according to analysts.
Carmakers selling vehicles priced at 100,000 yuan (US$14,812) were currently making net earnings of just 1,500 yuan on average, a profit margin of only 1.5 per cent, Chen Shihua, deputy secretary general of the China Association of Automobile Manufacturers, told an industry conference last month.
That represented a sharp decline from the 3.4 per cent average profit margin recorded in May, according to data released by the CPCA.
