China’s EV Sales Crash! Over 100M Unsold Cars Pile Sky-High, Sold as Scrap; CATL Demand Plunges

Wow, look at this. These are all new energy vehicles, electric cars, and plug-in hybrids. They stretch as far as you can see. Look how many there are. Does anyone know what's going on? This is such a new car, and it is just parked here. There is moss growing outside, but the inside is still brand new. It's a Dongfeng A-Less, made in August 2023. Many remote parking lots and abandoned industrial parks around major Chinese cities have a striking sight. Tens of thousands of new energy vehicles are packed onto muddy overgrown lots. These car graveyards have become an open secret within China's electric vehicle industry. Many of the vehicles slowly rusting in the rain covered in moss are brand new cars with virtually no mileage. Some still have protective film on their interiors. They were transactions that fulfilled sales targets and inflated figures, then abandoned right after. Others are used vehicles left behind by ride-hailing companies that collapsed amidst fierce competition. Another ride-hailing company has gone under. These cars were only driven for two or three years. Who knows how long they've been sitting here? The grass is taller than the cars. These sell for tens of thousands of yuan, less than anywhere else. Over the last several years, local governments offered cheap land and enormous subsidies to attract investment and boost their performance and tax figures. Automakers kept ramping up production to attract investors while knowing the market could not absorb it. The result was an uncontrolled production boom, massive overcapacity, and intense competition. Repeated price wars drove many EV startups out of business. Then conditions worsened. In 2026, a rapid contraction in China's consumer market dealt another severe blow to automakers that had expanded without restraint. Even the traditional September and October sales season, which dealers hoped would turn the year around, stalled. The latest figures from the China Passenger Car Association show September passenger car retail sales plunged 28% year over year. Sales from January through September fell 21.7 percent more concerning new energy vehicles retail sales posted a rare decline falling 12 to 16.7 percent year over year chinese domestic brands saw declines approaching 19 percent yet while retail sales slumped manufacturers september wholesale shipments rose 11 percent year over year consumers were not buying but manufacturers kept pushing vehicles into distribution channels to improve their financial reports. Dealers already under severe strain were left carrying the inventory. The latest figures from the China Automobile Dealers Association put dealership inventory at about 2.7 million vehicles at the end of September 2026. The overall inventory-to-sales ratio reached 1.68, up 6.3% from the previous month and 24.4% from a year earlier. That was well above the industry warning level of 1.5. Many dealers are now closed to running out of cash. Large numbers of car dealerships are shutting down or going bankrupt, with owners fleeing and abandoning their businesses. The entire retail auto sales network is now deep in financial turmoil. With new energy vehicles now accounting for 67% of the market, the room for further growth has been exhausted. Companies are fighting over existing demand while the gasoline car market they are trying to replace is also shrinking sharply. Endless price cuts give buyers another reason to wait. People fear buying just before the next discount. The more prices fall, the more reluctant they become to buy. Policies, restrictions and license plates for conventional cars and price wars help drive up new energy vehicle adoption. But household purchasing power has reached its limit bringing that growth engine to a halt everyone's gone quiet now haven't they the news comes out and nobody says a word where is all the boasting about having every technology and being far ahead it's all gone quiet i'm telling you if you hold off buying in the second half of the year prices for electric and gasoline cars will keep falling automakers inventories are piling high Some people are much more desperate to sell than you are to buy. Remember, keeping money in your pocket is what counts. On the front lines, dealership sales staff and owners are struggling to cope. Want to see how intense car sales have become? It's 9pm and we're still calling customers to book appointments. See, everyone's here. Nobody has gone home. If people don't start buying cars, we really are going to lose our jobs. is our dealership the only one doing this badly last month august the three of us in sales took turns covering shifts i worked about eight or nine shifts and had just 19 customers only eight were walk-ins, the others were returning customers or people i'd already been following up with i closed four sales last month, two were existing customers buying another car or replacing one One was a referral, the other was someone I'd added on WeChat in 2024 who finally decided to replace his car this year. So out of those eight walk-ins, not one bought anything. I really want to know where the top salespeople are finding their customers. Many automakers can't sell their cars anymore. At around 100,000 yuan, about 14,000 US dollars, you might once have had 15 models to choose from. Now, there may be 40 or 50. With the same number of buyers, sales get spread across more models. And there are actually fewer buyers now. When China's car market was strong, 23 million to 24 million people bought cars each year. This year and last year, that fell to 21 million to 22 million. Buyer numbers have dropped 10% over the last few years. Yet, every automaker keeps launching models, building cars, and frequently updating them. Sales growth in return is very low. It's not because the car has gotten worse. It's just that the state of the market. Chinese media say a competition between established automakers and EV startups intensified as the September and October sales season began. Progress towards annual sales targets through the third quarter of 2026 became a key indicator of year-end prospects. But through the first three quarters, not one established automaker or startup had reached 70% of its annual target. Among traditional manufacturers, Sherry led slightly at 69% by relying on overseas growth. Geely and SAIC were around 62%. Changan and Great Wall Motor were struggling at about 51%. The risk of missing targets were even more critical among newer automakers. Leading startups Leapmotor and Li Auto were only in the 60% plus range. XPeng, Xiaomi, and others were around 50%. They would need to double average monthly deliveries in the fourth quarter to meet their goals. The gap between winners and losers is also widening. BYD maintained its dominant position with 463,600 vehicles sold in September. ZEEKR and Aion managed growth in specific market segments, but many other newer brands faced heavy pressure on sales and profits as they fought over existing demand. Automakers are increasingly looking overseas as a last resource of support. With weak domestic demand and mounting barriers abroad, competition in the fourth quarter will determine whether many companies survive the winter. Used car dealers are also worried. Repeated price cuts on new cars have sent used car prices plunging and left the market struggling. I never imagined prices for new energy vehicles would fall this far. These prices are unbelievable. You'll be shocked when you hear them. A car like this used to cost 170,000 to 180,000 yuan new. Now you can buy it outright for just 30,000 yuan. The market is shrinking rapidly while the number of competitor multipliers. With a weak economy, falling property wealth, pay cuts, and unemployment, ordinary Chinese families have become extremely cautious about major purchases. They no longer expect their income to keep rising. Instead, they are repaying loans early and cutting non-essential spending to protect themselves. Even repeated cuts to manufacturer-suggested prices have failed to bring buyers back. Cars are increasingly seen as a financial burden rather than a necessary status symbol. They lose value as soon as they leave the dealership and bring high insurance and maintenance costs. As vehicle sales freeze, the pressure moves up to supply chain. Among the hardest hit is battery giant CATL, long regarded as a leading company on China's stock market. With a global market share that once approached 40%, CATL made large profits through its patent product scale and pricing power. But that growth model, dependent heavily on the rapid expansion of China's new energy vehicle production, it now faces a broad breakdown. CATL fell more than 12% yesterday, wiping out 140 billion yuan, about 20 billion US dollars, in market value. People say everyone is competing over who has it worse now. Normally, even semiconductor and technology stocks don't drop that much in a single day. But CATL managed it, down 12%. The battery industry is facing export tariffs, consumption taxes, and some battery safety issues. That could be a major blow to CATL and to battery buyers. CATL's shares plunged over just two days, raising nearly 200 billion yuan, about 28 billion US dollars, in market value. Its decline for the year exceeded 30%. JP Morgan downgraded CATL's Hong Kong-listed shares to neutral in an October 20 research report and cut its price target by 31%. It cited rapidly worsening profitability across China's EV industry, which it said would inevitably lead to a sharp drop in demand for vehicle batteries. The company's subsequent third quarter 2026 earnings report reinforced those concerns. Net profit growth slowed sharply to 14.5% while net profit fell nearly 6% from the second quarter, far below market expectation. Citibank's research also found that planned output of China's five largest battery makers rose just 1% month over month in October, normally a peak production month. the usual seasonal surge did not appear deeper problems lie in CATL's business practices and its aggressive use of market power which has alienated companies throughout the industry everyone has probably seen the recent news about that major battery manufacturer the company's profit keeps rising yet its share prices has been cut in half and don't tell me it's because of some technical issue the real problem is that the company has simply become far too greedy internally its top executives have pocketed tens of billions of yuan while ordinary employees have also seen their salaries rise externally however the company keeps squeezing profits out of businesses further down the supply chain and dragging out payment terms for an extremely long time its shareholders dividends are even more outrageous the dividend yield doesn't even reach the market medium in the short term these practices may indeed help the company generate impressive profits but they've also managed to alienate just about everyone now all it takes is for one competitor to step up and challenge the company and all the people and businesses it has offended in the past will line up against it the industry insiders criticism highlights a vulnerability in CATL's model the company has long used its dominant position to push suppliers prices down and delay payments while pressing automakers into exclusive agreements But price wars have driven the vehicle manufacturing industry average profit margin to a historic low of 1.5%. Automakers are now collectively pushing back against a model focused on protecting CATL's own high profits. To reduce their dependence, newer automakers including Xiaomi, Li Auto and Xpeng have turned to second-tier suppliers such as CALB, EVE Energy and Sunwoda. BYD is also gaining ground with its own batteries. Figures show CATL's share of installed vehicle battery capacity in China fell from almost 50% in January 2026 to 41% in September. Its weakening market power and falling demand are compounded by an upcoming battery consumption tax and cuts to export tax rebates. The once-dominant CATL has become one of the biggest casualties as the new energy vehicle bubble unwinds. With the domestic market contracting and inventories piling up, China's new energy vehicle industry is treating overseas expansions as its last lifeline, pushing excess output into foreign markets. China exported 8.2 million vehicles in the first three quarters of 2026, up 65.8% year over year. New energy vehicles accounted for more than half, with exports rising 130%. But international experts say this reflects severely weakened domestic demand and excess capacity with nowhere else to go, rather than industrial competitiveness. A senior fellow at the Carnegie Endowment for International Peace, Michael Pettis, said that without government subsidies, such low-price dumping destroys economic value. He described it as a temporary measure by Beijing to export surplus production at any cost and avoid mass unemployment from factory shutdowns. The new wave of low-price exports described as China's shock 2.0 is meeting strong resistance internationally. Access to Europe, a key source of profits, is tightening. In addition to tariffs of up to 45% on Chinese battery electric vehicles to offset subsidies, the EU reached an agreement in October to cut Chinese hybrid imports by more than half, capping them at $350,000 a year starting December 1st, 2026. Germany and France also jointly pushed a switch mechanism that could halt imports outright. The British government has kept additional tariffs as an option. An even greater threat comes from Western countries' concerns about security and espionage involving Chinese connected cars. During military exercises in Norway, Chinese vehicles were found recording military facility access codes without authorization. The Polish military barred Chinese cars from its facilities while the United States proposed legislation to ban Chinese connected vehicle software and hardware. Western governments increasingly see vehicles equipped with cameras, GPS, and internet connections as potential intelligence-gathering tools. Without effective rule-of-law safeguards, they could become Trojan horses serving Beijing's interests. Amid pressure at home and abroad, Chinese authorities announced that export tax rebates for new energy vehicles would fall from 13% to 9% starting April 1, 2027. Shrinking subsidies, high tariffs and unsold vehicles at foreign ports are undermining the industry's overseas expansion strategy. Analysts say that the bursting of China's new energy vehicle bubble is repeating the pattern of its property collapse. The property boom also began with a national policy push. Local governments released land aggressively and developers borrowed heavily with enormous credit support to build high-rises. Once households' purchasing power was exhausted, that financial structure collapsed, leaving unfinished buildings and fiscal shortfalls of trillions of yuan. Today's new energy vehicle industry is following the same path. Local officials' performance targets again drive duplicated investment. Even as factory utilization falls below sustainable levels, automakers keep expanding under local government's protection, draining society's wealth. These policy distortions undermine the economy's ability to adjust. To sustain the new energy vehicle boom, public finances provide hundreds of billions of yuan in subsidies each year, while the financial system carries huge hidden bad debts. Healthcare, elder care, education and small private businesses struggle for funding. Automakers cut costs and wages to survive, leaving households even less willing to spend. Layoffs and pay cuts weaken demand, unsold goods pile up and companies cut jobs and wages again. The same cycle appeared before the real estate sector collapsed. Vast car graveyards, overflow inventories, and a battery leader losing 200 billion yuan in market value in two days all signaled danger. As this expansion drains national resources and household finances, its collapse could bring a downturn even longer and harsher than the property crisis.