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China eyes EV output curbs to tackle 50 million unit surplus
Chinese government and industry officials are likely to discuss controlling EV output and prioritizing technological upgrades at the annual “two sessions” – the NPC and CPPCC – in Beijing, according to analysts.
Regulators moved last year to ban selling cars below cost and to crack down on delayed payments to suppliers to counter deflationary pressure.
China made and sold over 16 million EVs last year, and total vehicle output rose 10.5% to 34.5 million units in 2025, according to the China Association of Automobile Manufacturers.
Total annual capacity is estimated at about 50 million units, Nick Lai of JPMorgan said in October, with some plants capable of millions of vehicles still under construction, analysts said. In January, Deutsche Bank forecast total car sales – including EVs and petrol cars – would fall 5% this year.
Paul Gong of UBS predicted in January that EV deliveries would rise about 8% year-on-year but at a slower pace than the 28.2% growth in 2025.
🔗 Source: South China Morning Post
🧠 Food for thought
Implications, context, and why it matters.
Top party and government officials have stepped up oversight of the EV price war
- Last year, regulators banned selling cars below cost and tightened rules on late payments to suppliers to ease deflationary pressure.
- Oversight has expanded beyond day to day enforcement. A Communist Party central guidance group and three top ministries met with automakers, including BYD, to rein in what they call “irrational competition” 1.
- Margins have taken a hit, with industry net profits down 11.9% in the first five months of 2025 even as sales rose 2.
- This tougher stance followed a 2023 industry pledge to “avoid abnormal pricing” that was withdrawn within days, which exposed the limits of self-regulation 3.
China’s domestic auto oversupply is contributing to global trade tensions
- Annual capacity sits near 50 million units, while vehicle output rose 10.5% to 34.5 million units in 2025, which points to persistent oversupply.
- Demand is softening. Deutsche Bank expects total car sales to drop 5% this year, pushing automakers to lean on exports as a “pressure valve” 4.
- January 2026 brought a split outcome, with domestic deliveries down 16% while exports jumped 45% 5.
- Trade partners have responded with barriers, including 100% tariffs from the US and Canada plus EU duties up to 35.3% on Chinese EVs 6.
- Companies have also shifted toward plug-in hybrids (cars that can run on both a battery and petrol and can be charged from a plug). MERICS says exports of these models to the EU quadrupled, which helped skirt EV duties aimed at battery-electric vehicles 4.
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