BEIJING (news agencies) — The Chinese government is signaling enough is enough when it comes to the fierce competition in the country’s electric car market.
China’s industrial policy has engineered a remarkable transformation to electric vehicles in what is the world’s largest auto market. In so doing, it has spawned far more makers than can possibly survive. Now, long-simmering concerns about oversupply and debilitating price wars are coming to the fore, even as the headline sales numbers soar to new heights.
Market-leader BYD announced this week that its sales grew 31% in the first six months of the year to 2.1 million cars. Nearly half of those were pure electric vehicles and the rest were plug-in hybrids, it said in a Hong Kong Stock Exchange filing. The company phased out internal combustion engine cars in 2022.
BYD came under thinly veiled criticism in late May when it launched a new round of price cuts, and several competitors followed suit. The chairman of Great Wall Motors warned the industry could come under threat if it continues on the same trajectory.
“When volumes get bigger, it’s just much harder to manage and you become the bullseye,” said Lei Xing, an independent analyst who follows the industry.
The government is trying to rein in what is called “involution” — a term initially applied to the rat race for young people in China and now to companies and industries engaged in meaningless competition that leads nowhere.
BYD has come under criticism for using its dominant position in ways that some consider unfair, sparking price wars that have caused losses across the industry, said Murthy Grandhi, an India-based financial risk analyst at GlobalData.
With the price war in its fourth year, Chinese automakers are looking abroad for profits. BYD’s overseas sales more than doubled to 464,000 units in the first half of this year. Worried governments in the U.S. and EU have imposed tariffs on made-in-China electric vehicles, saying that subsidies have given them an unfair advantage.
The latest bout of handwringing started when BYD cut the price of more than 20 models on May 23.
The same day, the chairman of Great Wall Motors, Wei Jianjun, said he was pessimistic about what he called the “healthy development” of the EV market. He drew a comparison to Evergrande, the Chinese real estate giant whose collapse sent the entire industry into a downturn from which it has yet to recover.
“The Evergrande in the automobile industry already exists, but it is just yet to explode,” he said in a video message posted on social media.
Two days later, a BYD executive rejected any comparison to Evergrande and posted data-filled charts to buttress his case.
“To be honest, I am confused and angry and it’s ridiculous!” Li Yunfei, BYD’s general manager of brand and public relations, wrote on social media. “All these come from the shocking remarks made by Chairman Wei of Great Wall Motors.”
Next, the government and an industry association weighed in. The China Association of Automobile Manufacturers called for fair competition and healthy development of the industry, noting that major price cuts by one automaker had triggered a new price war panic.
On the same day, the Ministry of Industry and Information Technology vowed to tackle involution-style competition in the auto industry, saying that recent disorderly price wars posed a treat to the healthy and sustainable development of the sector.
