Hard Power meets Soft Power: The dual test for a maturing industry.
As the tide of government support recedes, the electric vehicle (EV) industry is navigating a critical pivot from policy-driven growth to market-driven self-sufficiency.
In 2025, China’s New Energy Vehicle (NEV) penetration rate crossed the 50% threshold for the first time. This milestone marks the arrival of “price parity reversal,” where EVs have become fundamentally more cost-competitive than their internal combustion engine (ICE) counterparts. With charging infrastructure now ubiquitous and average ranges comfortably exceeding 500 kilometers, “range anxiety” has largely vanished from the consumer psyche. The rise of domestic Chinese champions and relentless internal competition have effectively rewritten the industry’s playbook.
However, beneath the surging sales figures, a new front has opened. While “electrification” is now a mature baseline, the “intelligentization” race has only just begun. Manufacturers are saturating the market with high-tech gimmicks, yet a gap remains between marketing and reality: urban autonomous driving still requires hyper-vigilance, and system misjudgments remain frequent.
The true turning point arrives in 2026. With purchase tax exemptions halved and subsidies restructured, the industry is entering a “naked-swim” phase—a survival-of-the-fittest era where technological “hard power” and user-experience “soft power” will decide the winners.
2025 Retrospective: Reshaping the Landscape
2025 was the year EVs took center stage. In China, the NEV penetration rate hit 59.5% in November, meaning nearly 60 out of every 100 cars sold were electrified.
This shift was underpinned by two factors:
- Infrastructure Maturity: By November 2025, China’s charging network grew 52% year-on-year to 19.3 million units. Battery-swapping stations surpassed 5,000, and highway service area coverage reached 98%.
- Performance Parity: Standard ranges now sit between 500km and 700km, with high-end models breaking the 1,000km barrier.
The most profound shift, however, was in market hierarchy. Tesla’s retail sales in China fell 4.8% to 625,900 units, signaling the end of its undisputed dominance. In its wake, BYD emerged as the “super-leader,” moving 3.48 million units for a 27.2% market share—the only manufacturer to exceed the 3-million-unit mark.
The chasing pack saw a violent reshuffle. Geely Auto surged 81.3% to secure second place, while “dark horses” like Leapmotor (+86.3%) and Xiaomi Auto (entering the top 10 with 200.9% growth) disrupted the established order. Conversely, former leaders like Li Auto fell out of the top rankings.
The Intelligence Gap: Tech vs. Experience
In 2025, “intelligentization” became the industry’s primary battleground. BYD declared it the “Year of Mass-market Intelligent Driving,” while NIO, Li Auto, and XPeng raced to deploy AI World Models and proprietary 5nm chips.
Technically, the focus shifted toward Visual-Language-Action (VLA) models, which attempt to make driving more human-like by processing social rules. However, the technology still struggles with “corner cases” and extreme scenarios.
While manufacturers promote “L3” autonomy, regulatory approval remains limited to specific roads and speeds. High-profile accidents during aggressive marketing campaigns have also dampened consumer trust. As one industry observer noted, “The industry is infinitely approaching L3, but consumers are less interested in technical definitions and more focused on whether the car can safely navigate a commute or follow traffic on a highway.”
The Impakt Eye : Facing the Market Without Training Wheels
On January 1, 2026, the ten-year era of full tax exemptions ended. The new 5% tax rate adds roughly 10,000 to 15,000 RMB to the price of a mid-range EV, forcing the industry to compete on pure product merit.
Success in 2026 will depend on “Soft Power” ecosystems:
- Ultra-Fast Charging: Solutions from Huawei and BYD now allow for 20kWh per minute, offering a full charge in 15 minutes.
- Battery Swapping: CATL has entered the fray with its “Chocolate” swap program, targeting 30,000 stations long-term, while NIO expands its cross-brand ecosystem.
- Diversified Powertrains: The market is moving away from “pure-electric worship.” 2026 is seeing a resurgence of Extended Range Electric Vehicles (EREVs) and Hybrids, with even global giants like Ford, Toyota, and Volkswagen pivoting to include these in their portfolios.
Conclusion
2025 was the year EVs won the volume war. 2026 will be the year of structural consolidation. As global exports become a strategic necessity for Chinese brands facing a saturated domestic market, the competition moves from local price wars to a global struggle for technological depth, ecosystem loyalty, and brand value. The real battle has only just begun.
FAQ
Sources & References
- IEA, Global EV Outlook 2025, Paris, 2025. https://www.iea.org/reports/global-ev-outlook-2025
- Reuters, Global EV sales growth likely to slow after 20% jump in 2025, January 14, 2026. https://www.reuters.com/sustainability/climate-energy/global-ev-sales-growth-likely-slow-after-20-jump-rocky-2025-research-firm-says-2026-01-14/
- AP News, Chinese EVs are making inroads in North America, 2025. https://apnews.com/article/7d396ab9ab0a7ee6c2c56cda23534918
- CarNewsChina, China ends full EV tax exemption in 2026, November 9, 2025. https://carnewschina.com/2025/11/09/china-ends-full-ev-tax-exemption-in-2026-dealerships-report-year-end-sales-rush/
- Financial Times, BYD overtakes Tesla as top global EV seller, 2025. https://www.ft.com/content/c1c5f811-7b3f-4011-8e1e-cccb5aa80313
