The price war engulfing China’s electric vehicle industry has sent share prices tumbling and prompted an unusual level of intervention from Beijing. The shakeout may just be getting started.
For automakers, relentless discounting erodes profit margins, undermines brand value and forces even well-capitalized companies into unsustainable financial positions. Low-priced and low-quality products can seriously damage the international reputation of “Made-in-China” cars, the People’s Daily, an outlet controlled by the Communist Party, said. And that knock would come just as models from BYD to Geely, Zeekr and Xpeng start to collect accolades on the world stage.
For consumers, price drops may seem beneficial but they mask deeper risks. Unpredictable pricing discourages long-term trust — already people are complaining on China’s social media, wondering why they should buy a car now when it may be cheaper next week — while there’s a chance automakers, as they cut costs to stay afloat, may reduce investment in quality, safety and after-sales service.
Chinese automakers have been discounting a lot more aggressively than their foreign counterparts.
Others leave no room for doubt that BYD, China’s No. 1 selling car brand, is the culprit.
“It’s obvious to everyone that the biggest player is doing this,” Jochen Siebert, managing director at auto consultancy JSC Automotive, said. “They want a monopoly where everybody else gives up.” BYD’s aggressive tactics are raising concerns over the potential dumping of cars, dealership management issues and “squeezing out suppliers,” he said.
The pricing turmoil is also unfolding against a backdrop of significant overcapacity. The average production utilization rate in China’s automotive industry was mere 49.5% in 2024, data compiled by Shanghai-based Gasgoo Automotive Research Institute show.
An April report by AlixPartners meanwhile highlights the intense competition that’s starting to emerge among new energy vehicle makers, or companies that produce pure battery cars and plug-in hybrids. In 2024, the market saw its first ever consolidation among NEV-dedicated brands, with 16 exiting and 13 launching.
While the push to find an outlet for excess production is thrusting more Chinese brands to export, international markets can only offer some relief.
“The US market is completely closed and Japan and Korea may close very soon if they see an invasion of Chinese carmakers,” Siebert said. “Russia, which was the biggest export market last year, is now becoming very difficult. I also don’t see Southeast Asia as an opportunity anymore.”
Within days though, CAAM deleted one of the four commitments, saying that a reference to pricing in the pledge was inappropriate and in breach of a principle enshrined in the nation’s antitrust laws.
The discounting continued unabated.
