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

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 S. 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 S.

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 S. 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 S. 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" S. 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" S. 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 S.

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

• Ford recorded a $19.5 billion EV-related charge in late 2025 and canceled several planned models SS.
• General Motors took a $1.6 billion hit from pulling back EV investments, with more write-downs expected S.
• Stellantis booked €22.2 billion in charges as it scaled back electric ambitions S.
• 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 S.
• Across the industry, global carmakers booked over $70 billion in writedowns in the 2025 fiscal year as they scaled back EV ambitions S.

Analysts describe the situation as a brutal "valley of death" for legacy automakers navigating the transition from ICE to EVs S. 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.