China’s auto and EV industry faces sales headwinds and margin pressure in 2026

SelfRugger · 2026-02-26T16:08:34+00:00

China's auto and EV industry is expected to struggle in 2026 due to falling sales and increasing costs. Competition and rising raw material prices will pressure margins, despite a projected 40% growth in EV exports.

SelfRugger

2026-02-26 16:08:34

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China’s auto and EV industry faces sales headwinds and margin pressure in 2026

Sam Boughedda

Fri, February 27, 2026 at 12:58 AM GMT+9 2 min read

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Investing.com – China’s auto and electric-vehicle market is expected to experience a difficult 2026, with sales and margins facing mounting pressure, according to Bank of America analyst Ming Hsun Lee.

In a note on Thursday, Bank of America said it has cut its 2026 sales and earnings estimates for most auto manufacturers, citing both weaker demand and rising costs.

Lee wrote that “intensified competition, higher EV purchase taxes, and reduced trade-in subsidies should weigh on sales volume, especially lower-priced cars.”

At the same time, the analyst warned that “rising raw material prices (memory chips, battery, and metals) should weigh on OEMs’ profitability,” prompting downward revisions to this year’s earnings forecasts.

To remain competitive, Lee believes automakers will need to “step up investment in AD and smart cabins to keep product configurations attractive,” even as profit pressures mount.

Despite the overall slowdown, BofA highlighted one bright spot: exports. The bank expects EV exports to grow 40% in 2026, compared with 7% growth in domestic EV sales, noting that Europe is already receiving models such as the Cupra Tavascan built in China.

Cost inflation is said to be becoming more visible across the supply chain.

“According to our supply chain check, we estimate: (1) cost inflation on a per-car basis from the memory price hike is c.RMB1K-3K, depending on the car’s intelligence level; (2) cost inflation on a per-EV basis from battery/battery material price hike is c.RMB1K (Plug-in hybrid EV) to 3K (battery EV); and (3) cost inflation on a per-car basis from metal price hike is c.RMB300-800 higher, as of February 2026, compared to end-3Q25,” wrote Lee.

The report also highlighted rapid growth in robotaxis, with deployments expected to reach 5,000 units in 2026 and expand sharply through the decade.

China’s auto and EV industry faces sales headwinds and margin pressure in 2026

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