China's Electric Vehicle And Battery Enter Downward Cycle? Voices Reemerge On The Truth Behind It, Analyzing Future Development Directions For Plastics

Specialized Plastic VisionOn December 15, it was observed that recently regardingThe discussion about whether China's new energy vehicle and battery industry has entered a downward cycle again is rampant.

Morgan Stanley and other institutions have released forecasts predicting a downturn in the Chinese automotive market next year. At the same time, the new energy industry chain is also reporting news such as rising prices of materials like lithium carbonate and the imposition of anti-dumping duties on batteries in certain regions.A large number of articles titled "New Energy Vehicles Entering a Downward Cycle" have emerged, sparking widespread attention and concern.

So, how much truth is there in these claims? Have the new energy vehicle and battery industries really entered a downward cycle? Will this situation prompt a change in the development direction of automotive plastics?

Source: Automotive Commune

New Energy VehiclesAlthough temporarily hindered, it is merely superficial.

Morgan Stanley releases "China AutoThe report "Shared Mobility: On the Verge of Both Decline and Innovation" predicts that in 2025, China's wholesale car sales, excluding exports, will grow by 9% year-on-year, while in 2026, it will decrease by 6% year-on-year. In the first quarter, there is an expected quarter-on-quarter decline of 30-35%, and the total domestic car sales for the year are expected to drop by 7%. The main reasons cited are the early withdrawal of local subsidies, unclear vehicle purchase tax compensation policies, rising lithium carbonate costs, and industry price wars.

However, it also points out that domestic giants in China, such as the Huawei alliance, will further rise.By 2026, it is expected to occupy 8-10% of the market share; overseas expansion will also continue to grow, with Great Wall Motors' exports accounting for 20% of sales. Moreover, Morgan Stanley is optimistic about the future market for companies making substantial progress in non-automotive fields.

Image source: BYD

More importantly, Morgan Stanley's forecast ofThe premise of the "Chinese car market slump" is the "uncertainty of the 2026 subsidy policy," but the actual situation is,From December 10 to 11, the Central Economic Work Conference will deploy measures to optimize the implementation of the "two new" policies.In 2025, 300 billion yuan of ultra-long-term special government bonds will be issued for the "trade-in for new" program for consumer goods, not only doubling the quota but also expanding the coverage to digital products and home appliances. Data from the Ministry of Commerce shows that the national subsidy has had significant effects, with sales of related goods exceeding 2.5 trillion yuan from January to November 2025, benefiting over 360 million people, including more than 11.2 million vehicle trade-ins. This indicates that Morgan Stanley's predictions have already been contradicted by reality before they came to fruition.

From a more macro perspective, subsidy policies hold significant importance for the development of the automotive industry. Economic development has its phases. Over the past decade, substantial capital has been focused on production and research, suppressing consumption. Now, the state is allocating more budget to boost consumption. Both the price war and subsidies in the automotive sector have their causes. In the context of the global economy being dragged down by the COVID-19 pandemic and the slow pace of technological progress, leading to a decline in consumer purchasing power and confidence, price reductions in cars are a necessary means to maintain industry liquidity and operational vitality. Meanwhile, subsidy policies are a way for the state to assume the cost of discounts.

The sales trend in the Chinese automobile market over the past 20 years also proves that subsidy policies have repeatedly driven the market upwards, such asPolicies such as "bringing automobiles to the countryside," subsidies for "trade-in of home appliances and automobiles," small-displacement vehicle purchase tax reductions, exemptions from vehicle purchase tax for new energy vehicles, and the current "two new" policies have not only boosted sales but also driven long-term benefits through industry scale growth and job creation. These policies are the "cure" for promoting industry development.

Battery Industry: Key Materials Will Not Be in Short Supply in the Future

Looking at the battery industry, although there are the Gulf Six countries regarding automobiles originating from or exported from China and Malaysia.The news about the imposition of a final anti-dumping duty on lead-acid batteries targets components rather than complete vehicles. It concerns lead-acid batteries, not lithium-ion power batteries, and has very limited direct impact on the entire new energy industry chain and the automotive industry.

The statement "lithium batteries will significantly increase in price," according to Mo Ke, founder and president of True Lithium Research, indicates this round of lithium...The wave of price increases in the battery industry chain has a relatively limited impact on end-market new energy vehicles. Suppressed demand on the vehicle side will weaken the impact of battery costs. Automakers will mitigate risks through price agreements and self-development. Furthermore, when price increases in the industry chain reach the battery stage, they tend to be lower than the upstream material price hikes due to the longer chain and multiple buffers. Cui Dongshu, Secretary General of the China Passenger Car Association, also believes that the price of lithium carbonate is not expected to experience a significant supply-demand gap in the future, which will promote...In 2026, the cost of new energy vehicles will decrease, stabilizing their growth.

The new energy industry drives the transformation of automotive plastics.What about the future?

Plastic is widely used in various core systems of new energy vehicles, and different systems have varying performance requirements for the materials.

In the three-electric system (battery, motor, electronic control), which is a key part of new energy vehicles, there are extremely high requirements for the insulation, high voltage resistance, flame retardancy, and heat resistance of plastics. In terms of the battery system, the battery pack casing and battery management system...Components such as BMS require the use of specialty engineering plastics with V-0 level flame retardancy, high Comparative Tracking Index (CTI), and excellent chemical corrosion resistance to ensure safety and prevent thermal runaway in high-voltage environments. In electric drive systems, integrated components such as motors, controllers, and reducers require materials with good insulation, wear resistance, and compatibility with liquid cooling media.

In the power system, the onboard charger (OBC), DC/DC converters, etc. require materials to have excellent insulation, high voltage resistance, and flame retardant properties. The thermal management system is responsible for the heat dissipation and insulation of components such as batteries and motors, involving parts like electronic water pumps, valves, and pipelines. These components require plastics to have chemical resistance (such as coolant), dimensional stability, and good metal insert bonding performance.

In terms of body and interior/exterior trim, a large amount of plastic is used for lightweight purposes while ensuring strength and safety, in order to improve the cruising range. Modified polypropylene (PP is the most widely used material for bumpers, dashboards, door panels, and other interior and exterior trim parts.

In order to meet the stringent requirements of new energy vehicles, plastic material technology is developing towards high performance, functionality, and environmental friendliness.

High-performance modified polypropylenePPIt has the highest proportion in automotive plastics due to its high cost-effectiveness, low density, and excellent processing performance. Current research and development focus includes"Three Highs" (high liquidity, high intensity, high impact) grade to meet the needs of thin-walling, lightweighting, and structural component strength.Special Engineering PlasticsIndispensable in high voltage and high temperature environments such as batteries and motors, polyamide (Polyamide (PA) and Polyetheretherketone (PEEK), due to their excellent comprehensive properties, are often used in key components that require high insulation, high-temperature resistance, and structural strength.

Materials are also developing towards multifunctional integration.For example, featuring electromagnetic shielding and wave transmission.Plastic with wave-absorbing properties is used for intelligent driving sensors; at the same time, environmentally friendly features such as low odor/low emission, weather resistance, and recyclability are increasingly being valued.

Electromagnetic shielding materials, image source: AiBang

With the rapid proliferation of new energy vehicles, the demand for high-performance automotive plastics continues to grow. Market trends indicate that materials are developing towards integrated systems and material lightweighting, such as by using high-performance composites to replace metals, further reducing the overall vehicle weight and enhancing energy efficiency.

Epilogue:

The assertion that new energy vehicles and batteries are entering a downward cycle lacks sufficient evidence and is a false proposition. New energy vehicles align with the evolutionary framework of human energy control, possess numerous development advantages, and there is currently no actual data indicating they are entering a downward cycle.

Zhuansu Shijie believes that automotive plastics, as an essential supporting material for new energy vehicles, will not easily change direction due to these unfounded claims. On the contrary, they will continue to evolve towards high performance, functionality, and environmental friendliness in line with the development of new energy vehicles, better meeting the needs of the industry and jointly promoting sustainable development.