In 2025 China passed a symbolic inflection point: electric vehicles (EVs) accounted for more than half of new-car sales, peaking at 59.5 percent in November. That milestone reflects a rapid build-out of charging and swapping infrastructure and a leap in real-world range, turning what the industry calls “oil–electric inversion” from slogan into fact.
Charging networks multiplied and batteries stretched farther. By the end of November 2025 China had about 19.32 million charging connectors, up 52 percent year‑on‑year, while swap stations exceeded 5,000 and highway service areas reached 98 percent charger coverage. Most mainstream models now advertise 500–700 km range, and a few high-end cars claim north of 1,000 km, blunting the erstwhile “range anxiety” that slowed adoption.
The market structure has changed with equal speed. Tesla’s China retail volumes fell 4.8 percent in 2025 to about 625,900 units, while BYD remained the runaway domestic leader at 3.484 million units (27.2 percent market share), the only maker to top three million. Fast-growing incumbents and new entrants reshuffled the rest of the ranking: Geely surged, Changan rose, and new-energy challengers such as Leapmotor and Xiaomi Auto posted dramatic percentage gains.
Those headline figures mask an industry under pressure. A year-long price war, triggered by Tesla’s early price cuts, forced rivals to chase volumes at thin margins, transmitting cost stress across the supply chain. Some manufacturers shortened supplier payment cycles to 60 days in an attempt to stabilise partners, while others began to hedge by building proprietary technology and services that could sustain margins after subsidies recede.
The next battlefield is software and autonomy. 2025 saw fevered marketing of “smart driving” capabilities: BYD’s push for broad access to advanced driver assistance, NIO’s world‑model ambitions and in‑house chips, Li Auto’s vision of a multimodal driver model, and Xpeng’s claims about physical‑world AI. The technical focus shifted from narrow perception models to VLM/VLA (visual‑language/action) approaches and “world models” that aim to predict physical dynamics rather than map inputs straight to outputs.
Progress is real but incremental. Chinese regulators approved only a handful of L3 entries late in 2025—Changan’s SL03 and BAIC’s Arcfox Alpha S, and only for limited routes and speeds—and several well‑publicised incidents have dented consumer trust. Many buyers now treat driver assistance as helpful on highways but unreliable in complex urban scenarios, a sentiment captured by drivers who praise motorway convenience but report sudden braking and misjudgements in city traffic.
Hardware advances in charging and swapping are moving apace alongside software. Huawei unveiled a 1.5 megawatt charging solution, BYD rolled out its liquid‑cooled megawatt flash charge terminals, and Zeekr and others are producing high‑power fast chargers. On swapping, CATL’s two swap brands and NIO together account for thousands of stations, and CATL has set an ambitious multi‑thousand station rollout plan for 2026–beyond, signaling that multiple replenishment models will coexist.
Policy changes are forcing a strategic reset. China moved from ten years of full purchase‑tax exemption to a half‑tax regime from January 1, 2026, lowering the maximum tax break from about RMB 30,000 to 15,000 and converting trade‑in subsidies to price‑linked proportions. That shift produced a late‑2025 “last‑train” buying rush and marks the sector’s transition from policy support to market discipline: 2026 will be a year of “bare competition” where unit economics, product fit and after‑sales ecosystems matter more than headline penetration.
The industry’s near term winners will be those that combine scale manufacturing with proprietary software, diversified replenishment strategies and credible service ecosystems. The losers will be brands that rely solely on price or lag in software and localized product cadence. As Chinese EV makers expand abroad and global incumbents launch range‑extended models, 2026 will expose which approaches are transnationally competitive and which are only viable in a heavily localised Chinese market.