Tighter regulation, chronic overcapacity, and slowing innovation are reshaping the global Vape industry. Once a fast-growing consumer electronics segment, vaping is now moving decisively from shallow waters into a deep, high-risk environment where every strategic misstep carries consequences.

On December 18, 2025, China released the Opinions on the Full-Chain Crackdown on Tobacco-Related Illegal Activities. The document landed like a depth charge across the industry. It calls for comprehensive strengthening of Vape regulation and explicitly targets illegal production, wholesale, transportation, sales, and the re-importation of exported vaping products.

At the same time, thousands of kilometers away, Russia is advancing legislation that would require all Vape sales to obtain licenses starting March 1, 2026, with mandatory integration into the national “Honest Label” digital traceability system.

These two policies are not isolated events. Together, they signal a clear global trend: Vape regulation is moving from surface-level oversight into a deep, system-wide enforcement phase.

1. Regulation Enters the Deep Water Phase

China’s new policy framework marks a qualitative shift. Beyond domestic enforcement, it places strong emphasis on regulating overseas affiliates, joint ventures, and foreign distributors of Chinese tobacco and Vape companies. The goal is explicit: prevent smuggling and “export-to-domestic” gray-market circulation.

For years, some companies treated cross-border arbitrage as a tolerable risk. That window is closing. The Opinions integrate tobacco enforcement into diplomatic coordination, judicial cooperation, and cross-border intelligence sharing. This elevates vaping from a regulatory issue to a transnational law-enforcement priority.

Russia’s proposed system reflects a similar logic. Modeled after alcohol regulation, it would require all Vape products—covering wholesale, retail, and delivery channels—to be licensed and digitally tracked throughout their lifecycle.

The urgency is clear. Official data shows illegal circulation rates of nicotine products in Russia reaching 65.8%, and over 86% for nicotine liquids. By comparison, after tobacco traceability was implemented, illegal market share fell to 10.8%. The vaping sector is now expected to follow the same path.

2. A Market of Contradictions: Growth and Contraction Coexist

The global Vape industry today presents a paradox. On the surface, brands multiply and capital remains active. Beneath that surface, pressure is building.

In the first half of 2025, global Vape exports declined to approximately USD 4.7–4.8 billion, down 10–15% year-on-year. Core Western markets are losing momentum.

In the United States, the FDA’s PMTA framework has become a decisive market filter. Roughly 76% of small and mid-sized brands have exited after failing to obtain authorization. Europe tells a similar story. Beginning in 2025, countries including the UK and France introduced disposable vape bans, causing demand for flavored single-use products—previously more than 70% of the market—to collapse almost overnight.

Yet contraction in compliant markets has not eliminated demand. Instead, it has redirected it. Illegal channels and regulatory gray zones have expanded. Industry surveys show that nearly 70% of practitioners identify extreme internal competition as the supply chain’s primary bottleneck—competition that increasingly spills into non-transparent territory.

Some manufacturers pivoted toward “refillable” or hybrid designs aimed at regulatory loopholes. These products may appear compliant on paper, but in practice they operate at the edges of enforcement.

3. Saturation in Core Markets and Channel Warfare

North America and Europe remain the industry’s revenue backbone—but both are showing fatigue.

North America accounts for 57% of global market share, yet legal Vape sales fell 12.3% in 2024. Europe holds over 32% of global revenue, but growth expectations have been revised sharply downward, from 25% to around 7%, as disposable bans redirect demand toward closed-system products.

Consumer sentiment is also weakening. WHO reports on vaping health risks have reduced repeat purchase rates from around 80% to 35%, while 40% of users report intentions to quit entirely.

Channel dynamics add another layer of complexity. After online sales restrictions, physical retail expanded aggressively. Convenience stores and vending machines now carry disposable products at an 89% penetration rate, while pod-based systems remain concentrated in specialized vape shops. This segmentation reinforces user differences but intensifies price wars and product homogeneity.

In southern China, particularly within a 50-kilometer radius of Shenzhen Bao’an, global leaders such as Smoore and RLX cluster alongside hundreds of suppliers—creating both efficiency and extreme competitive density.

4. The Compliance Trap: Three Structural Pressures

Vapes are no longer just consumer products. They sit at the intersection of public health, youth protection, cross-border trade, and international taxation. This makes compliance not a cost center, but a survival requirement.

Tax pressure continues to rise. Spain introduced a new excise tax on e-liquids in April 2025. Canada is building a unified national vaping tax framework. For exporters, compliance costs now directly affect margin viability.

Advertising restrictions are tightening globally. Italy banned online sales of nicotine Vapes. In the U.S., states like Illinois prohibit advertising formats that could mislead consumers.

Certification thresholds remain the highest barrier. In the U.S., PMTA approval is costly and slow. As of mid-2024, all authorized products were limited to tobacco or menthol flavors. Fruit and confectionery flavors remain excluded, effectively reshaping the product landscape.

5. The Rise of the Deep-Sea Giants

While smaller firms struggle, multinational tobacco companies are consolidating power.

Philip Morris International reported USD 4.4 billion in revenue from smoke-free products in Q3 2025, up 18.9% year-on-year. These products now represent over 41% of its total revenue. Its nicotine pouch brand ZYN holds a dominant 66.8% share in the U.S.

Heated tobacco (HNB) products have become the next growth engine. In 2024, global HNB market value reached USD 38.9 billion, growing 13% year-on-year. PMI’s IQOS holds a 31.7% market share in Japan.

British American Tobacco is accelerating its “smoke-free future” strategy with products like Glo Hilo, launched in Japan, Poland, and Italy. Featuring a five-second heat-up time and quartz heating elements reaching 370–380°C, these devices showcase how capital, R&D, and regulatory alignment reshape competition.

For undercapitalized manufacturers without proprietary technology, the space to survive is shrinking fast.

6. Overcapacity and the Innovation Bottleneck

Structural oversupply is the industry’s most acute challenge. China accounts for roughly 90% of global production capacity, far exceeding actual demand. At the same time, innovation momentum slowed noticeably in 2025.

Disposable vapes once absorbed excess capacity. With bans spreading across Europe, large portions of that capacity are now stranded.

The industry faces a dual squeeze:

• Low-end overcapacity fuels black markets and price erosion.
• High-end innovation lags, locking companies into costly homogenous competition.

Between 2025 and 2027, a significant wave of exits is expected—particularly among factories dependent on disposable OEM orders. Leading firms are responding through mergers, consolidation, and increased investment in smart devices, sustainable materials, and long-term platform technologies.

7. Survival Rules in the Deep Sea

The transition from shallow growth to deep-water regulation is not an anomaly—it is an inevitable phase of industry maturation.

The rules are now clear:

• Compliance is non-negotiable. Regulatory capability defines brand survival.
• Technology is the core differentiator. Advances in ceramic heating, temperature control, and eco-design will separate leaders from followers.
• Global diversification matters. With Western markets saturated, Southeast Asia, the Middle East, and Africa offer growth—but demand localized strategy and regulatory agility.
• Social responsibility is strategic. Youth protection and environmental accountability are no longer optional; they underpin long-term legitimacy.

The water is deeper now—but deeper waters also mean more stable currents and a healthier ecosystem. Companies that adapt to pressure, master compliance, and invest in real innovation will not only survive, but define the next phase of the global vaping industry.