China EV Makers Cut Guidance as Profits, Demand Weaken

Chinese electric-vehicle manufacturers entered the final quarter expecting sustained earnings momentum, but results released in recent weeks have instead highlighted weakening profitability and softening demand ahead of 2026. Xpeng, Leapmotor, Li Auto, Nio, BYD, and Geely all issued earnings updates and guidance that have recalibrated investor expectations for the sector.

Xpeng’s shares fell 10% in Hong Kong after the company posted another quarterly loss and offered what analysts described as subdued guidance. Leapmotor, despite nearly doubling sales, reported profit at less than 65% of analyst estimates, sending its shares to their lowest level since April. Li Auto and Nio also issued fourth-quarter delivery and revenue forecasts that missed consensus, sharpening concerns among institutional investors reviewing their positions in EV equities.

Analysts say the sector is bracing for weaker demand as China’s trade-in and scrappage incentives wind down. Bing Yuan of Edmond de Rothschild Asset Management warned that the first quarter of 2026 will be “challenging,” adding that intensifying competition could further compress margins.

Manufacturers have turned to price cuts as vehicle-purchase tax exemptions start phasing out in 2026. Geely reduced prices by up to ¥15,000 (US$2,119), while Li Auto and Xiaomi followed with their own discounts. Daisy Li of EFG Asset Management said rising battery costs combined with discounting will remain a drag on profitability, even as Beijing attempts to curb excessive price competition through its “anti-involution” initiative.

Shifts in consumer preferences are also reshaping the market. Xiao Feng of CLSA noted that buyers who once favored mid- and high-tier models are increasingly opting for mass-market vehicles. These models are performing especially well overseas: BYD more than doubled its overseas sales in the third quarter, and Geely expects its international volumes to rise as much as 80% in 2026.

To counter an expected slowdown at home, Chinese automakers are accelerating international expansion, where margins are higher—an average of ¥20,000 (US$706) per vehicle, according to analysts. Companies are broadening their portfolios and moving into new regions to support revenue growth as domestic competition intensifies.

Leapmotor announced that two of its models will launch in Brazil and Chile, supported by an expanded sales network. IM Motors, the EV brand under SAIC, will deliver its first batch of IM6 SUVs—priced from NZ$66,900 (US$37,978)—to customers in New Zealand next month, highlighting the rising focus on Oceania. The developments reflect a wider push by Chinese EV manufacturers to build overseas market share ahead of a projected downturn in the mainland market.

At the same time, automakers are exploring strategies beyond traditional EVs. Xpeng said it plans to begin “serial production of humanoids” by late 2026, while Li Auto aims to evolve vehicles into “embedded-AI robots.” Analysts caution that such initiatives are long-term in nature and may take years to influence financial performance.

UBS Securities Asia noted that investors remain cautious, saying fund managers are unlikely to raise exposure without clearer policy signals for 2026—particularly for companies that benefited most from recent stimulus cycles.