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Anthony W.D. Anastasi
Anthony W.D. Anastasi

Opinion | How China’s EV titans can end the industry’s forever price war

Industry consolidation would not only end an unsustainable race to the bottom but also help Beijing’s broader economic agenda

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Employees work on an assembly line of an EV factory in Chongqing on May 20. After consolidation, the remaining companies will be in a stronger financial position to provide more stable employment and higher wages. Photo: EPA-EFE
Anthony W.D. Anastasi

China’s electric vehicle (EV) industry has achieved resounding success, marking a triumph for Chinese industrial policy and entrepreneurship. However, the sector now stands at a critical turning point.

Fierce price wars and destructive competition, or neijuan, epitomised by BYD’s recent dramatic price cuts, have prompted warnings from Chinese state regulators. For the health of the industry, China’s macroeconomic stability and the global economy, the solution should be clear: consolidation.
In May, BYD shocked markets by slashing prices on 22 of its models, bringing the entry-level price of its popular Seagull model down to just 55,800 yuan (US$7,700). Competitors rushed to match these cuts, fuelling an unsustainable race to the bottom.

Last year, BYD reportedly told suppliers to slash prices by 10 per cent. China’s Ministry of Industry and Information Technology has cautioned that such ruthless competition would undermine long-term innovation and safety standards. “There are no winners in a price war, let alone a future,” a ministry spokesperson told state media, marking a rare and blunt public rebuke.

The underlying issue is stark: China’s EV market is oversaturated. According to Jato Dynamics, there are now 115 Chinese EV brands vying for market share. However, after last financial year’s third quarter, 25 per cent of firms were in the red. Additionally, over 50 per cent of firms have less than 0.1 per cent market share.

Xpeng president Brian Gu said that in the future, “only 10 (carmakers) will survive”, suggesting his currently unprofitable firm would be among them. Price cuts are bleeding smaller companies dry, curtailing essential investments in research and development. Without sustainable profits, Chinese carmakers cannot innovate or maintain quality, risking safety issues and damaging the global reputation of “Made-in-China” products.
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