Nio founder, chairman, and CEO William Li recently shared his concerns about the upcoming challenges facing China’s electric vehicle (EV) sector in the first quarter of 2026. Li expressed his apprehensions during a media briefing at the company’s Shanghai headquarters, highlighting the potential growth pressures as a key national stimulus policy phase comes to an end.
The impending tapering of purchase tax incentives is expected to trigger a significant front-loading of demand in the fourth quarter of this year. Li acknowledged that this front-loading will lead to a surge in demand towards the end of the year, posing challenges for companies in the EV industry in the first quarter of 2026.
According to Li, all players in the EV sector will face considerable pressure in the first quarter of next year due to the decline of the vehicle purchase tax incentive. He emphasized that achieving even half of this year’s fourth-quarter demand levels in the first quarter of 2026 would be considered a positive outcome for the industry.
Despite the challenges ahead, Li remains optimistic and emphasized the importance of saving orders for the first quarter of next year to mitigate the impact of the declining tax incentives. He noted that this pressure is a shared industry challenge, and companies will need to adapt their strategies to navigate the changing market dynamics.
Nio is aiming to achieve its first non-GAAP profitability in the fourth quarter of this year, coinciding with the traditional peak in China’s auto market sales. The current vehicle purchase tax incentive policy, which was extended until the end of 2027 with a gradual decline by year, will pose challenges for companies in the EV sector in the coming year.
As the industry prepares for the changes ahead, companies like Nio are exploring innovative solutions to attract customers. Nio’s sub-brand Onvo reported that over 70 percent of customers opted for the Battery as a Service (BaaS) plan when purchasing the L90 large electric SUV. With the reduction of China’s purchase tax incentives next year, the popularity of BaaS options could increase further.
In conclusion, the EV industry in China is bracing for challenges in the first quarter of 2026 as the country’s tax incentives undergo changes. Companies like Nio are strategizing to weather the storm and adapt to the evolving market conditions to ensure sustainable growth in the future.
