Beijing braces for disruptive shift in electric vehicle scenario following BYD's provocative move
Electrifying Struggle: China’s EV sector in the heat of competition
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China's EV industry is currently in the throes of a tumultuous price war, with share prices taking a nosedive as a result. Beijing's intervention attempts have been met with limited success.
For all the Chinese government's efforts to quell price cuts by market leader BYD, analysts predict a brutal game of survival of the fittest is imminent. The industry may only start to recover in 2024, when overcapacity and weaker demand are projected to hack away at the profits of even the mightiest brands, leaving the less sturdy competitors in the dust.
Despite China's endeavors to reduce the collateral damage, authorities have vocalized their dismay over the ruthless competition. Last week, heads of major EV brands were summoned to Beijing for a stern talking-to. Preceding attempts to intervene yielded little fruit.
Currently, the Chinese EV industry accounts for an impressive 70% of global EV production[4]. In May 2025, China's NEV sales shot up to a staggering 1.021 million units, representing a 28% year-over-year increase, and marking the first-ever monthly sales figures to soar past the one-million milestone[2]. Battery electric vehicles (BEVs) constituted 607,000 of these sales, showing a 22.6% year-over-year boost[2].
The relentless price cuts are putting a dent in profitability, degrading brand value, and dragging even well-financed manufacturers into precarious financial positions. Low-priced, subpar merchandise can potentially harm the international standing of "Made-in-China" cars, catching flak from key Chinese brands just as they start raking in accolades on the global stage[5].
Consumers may initially see the lower prices as a positive, but they also face an increased risk of unstable pricing and, possibly, compromised quality, safety, and after-sales service[5].
According to insiders, auto CEOs are being urged to self-regulate, refraining from selling cars below cost or offering unreasonable price cuts. The issue of "zero-mileage" cars was also raised—these vehicles, free of mileage, are offloaded into the second-hand market, and it's believed they artificially inflate sales figures and help clear facility stock[5].
The word on the street is that Chinese manufacturers are engaging in some aggressive tactics. Jochen Siebert, managing director of auto consultancy JSC Automotive, alleges that "BYD is causing quite the stir, trying to achieve a monopoly and squeezing out competitors." BYD's actions, assertedly, have raised concerns about possible dumping of cars, dealership management issues, and putting undue pressure on suppliers[3].
The pricing turmoil isn't limited to the domestic market. In a shrinking global landscape, the US market is virtually off-limits, and Japan, Korea, and Russia are on high alert. In fact, Russia was the primary export market in 2024, but it is now becoming a more difficult market to penetrate[3].
The prospect of steeper cost-cutting has even sparked concerns over risks in the supply chain financing. A 2024 demand by BYD to one of its suppliers for price reductions drew scrutiny, suggesting that the car giant may use supply chain financing to mask a ballooning debt[3].
The pain stretches to China's auto dealership network, with two provincial dealerships powering down since April. Both of these dealerships, incidentally, had been selling BYD cars[3].
In 2023, major automakers, including Tesla, BYD, and Geely, all signed a pact to curb "abnormal pricing." However, just days later, the China Association of Automobile Manufacturers deleted one of the four commitments, boldly declaring that any reference to pricing was inappropriate and in contravention of China's antitrust principles[3].
Despite these obstacles, Chinese brands continue to expand their footprint in both domestic and international markets, promising to construct the electric-powered cities of tomorrow[1].
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Electrifying takeaways:
- The Chinese EV industry, producing over 70% of global EVs, is wrestling with a ruthless price war and extreme overcapacity.
- The competition is cutting so deep that it's testing the resilience of major brands and exposing chinks in the supply chain financing strategy.
- One of the world’s fastest-growing EV markets, China is undergoing a major shakeout, with weaker players and outdated business models at risk of falling by the wayside.
- Would-be overseas buyers should brace themselves for increasing trade barriers and negotiations between China and key export markets.
- Lower prices and a wider variety of vehicle choices benefit consumers, but the focus on price wars could come at the cost of investment in innovation and long-term quality assurance.
The Chinese EV industry's finance sector is grappling with the fallout of a fierce price war, with technology innovations potentially taking a backseat due to the industry's focus on reducing costs and increasing competition. Despite China's efforts to regulate the industry, analysts predict that the struggle for survival among manufacturers will continue well into 2024, potentially affecting the quality and safety of EVs produced.
