Global EV prices fell below hybrid prices for the first time in 2025 — these 4 forces are reshaping the auto industry

Prices fell even further for the less expensive chemistry that now dominates mass-market EVs. LFP (lithium-iron-phosphate) packs dropped to an average of $81/kWh globally, while in China — the world's largest battery market — average pack prices fell 13% to $84/kWh . Chinese prices were driven down by a combination of cell manufacturing overcapacity, intense competition among battery producers, and a rapid shift toward lower-cost LFP chemistry .

2. Global overproduction and scale economies

Nearly 22 million electric cars were produced globally in 2025 — a more than 25% increase from the previous year . China alone manufactured 16 million EVs, outstripping domestic demand by about 20% . This massive production overhang meant that manufacturers had to cut prices aggressively to move inventory, especially as domestic demand growth slowed .

3. China's record EV export wave

Chinese EV exports doubled to a record 2.5 million vehicles in 2025, valued at nearly $70 billion and reaching more than 150 countries . Carmakers like BYD and Chery flooded markets around the world, undercutting local competitors on price. The export surge was dramatic: shipments to Mexico surged by over 2,000% in a single month, and more than 600,000 Chinese EVs arrived in Europe in the first 11 months of the year . China now accounts for nearly 75% of global EV production and 40% of EV trade . Non-OECD markets — including Mexico, Brazil, the UAE, and Indonesia — accounted for all the growth in Chinese EV exports in 2025, even as US and EU tariffs limited access to those traditional car markets .

4. A global price war

Tesla and BYD led aggressive price-cutting from 2023 through 2025, forcing every major OEM to follow suit . The average BEV price fell about 6% globally in 2025 alone, and larger BEVs have already reached price parity with ICE equivalents in several markets . The price war has been described as a "Prisoner's Dilemma" — no automaker can afford to hold prices steady while competitors cut them, and the resulting profit squeeze is reshaping the entire competitive landscape .

How this milestone is reshaping the auto industry

Cheaper batteries are accelerating the tipping point

With BEV pack prices below $100/kWh and falling, the cost gap between EVs and ICE vehicles has nearly closed at the manufacturing level . This is enabling automakers to launch genuinely affordable mass-market models. In China, dozens of NEV models are now priced at or below comparable ICE vehicles . The IEA notes that the average BEV purchase price declined across almost all segments and major markets in 2025, a trend it expects to continue .

Chinese dominance is forcing a global realignment

China's production overhang — 16 million EVs built vs. roughly 13 million sold domestically — means the export surge is structural, not temporary . Chinese firms also hold an estimated 2–3 year lead over Western rivals in software-defined vehicles, further widening the competitive gap . The flood of low-cost Chinese EVs has triggered defensive tariffs from the US and the EU, but Chinese brands keep finding new markets in Asia, Latin America, and the Middle East . The value of Chinese EV exports nearly tripled from 2022 to 2025, and EVs now represent more than 35% of all Chinese car exports, up from 20% in 2024 .

Legacy automakers face existential pressure

The combination of cheap Chinese competition, a price war, and the EV transition is pushing legacy automakers into what analysts describe as a "potentially existential threat" . A report from Teneo warns that "home markets have traditionally been profitable for Western OEMs, however this is under threat from a more intensive competitive environment" . The Bank of Italy notes that European, Japanese, and Korean OEMs face mounting pressure from Chinese electrification, trade fragmentation, and the software-defined vehicle transition .

Moody's describes the sector as shifting "from cyclical slowdown to structural pressure," with profitability and capital efficiency under severe strain . PwC says the sector faces "fierce competition from leading Chinese New Energy Vehicle manufacturers" alongside tariff uncertainty and supply chain disruption . The results are visible in the numbers:

• Ford recorded a $19.5 billion EV-related charge in late 2025 and canceled several planned models .
• General Motors took a $1.6 billion hit from pulling back EV investments, with more write-downs expected .
• Stellantis booked €22.2 billion in charges as it scaled back electric ambitions .
• Volkswagen has sought approval for a broader restructuring plan that could include up to 100,000 job cuts and the closure of four German factories .
• Across the industry, global carmakers booked over $70 billion in writedowns in the 2025 fiscal year as they scaled back EV ambitions .

Analysts describe the situation as a brutal "valley of death" for legacy automakers navigating the transition from ICE to EVs . The shift is from a cyclical slowdown to a structural realignment, and the companies that emerge may look very different from the ones that entered it.

In short, the convergence of record-cheap batteries, Chinese manufacturing scale, and a global price war has permanently reset EV pricing expectations — and is forcing the traditional automotive industry into its deepest restructuring since the invention of the assembly line.