Several automakers were officially warned about overcapacity and more price controls could be on the way
https://www.carscoops.com/author/chris-chilton-cc/
by Chris Chilton
23 minutes ago
- China’s president has railed against over-investment and diminishing returns in the EV industry.
- Xi Jinping’s government wants to regulate car prices to safeguard the country’s economic growth.
- BYD’s Seagull EV now costs as little as $7,800, one third of the price of the version sold in Europe.
China’s government is done with watching the country’s car industry going at war with itself. Officials are concerned that the ongoing EV price war threatens the nation’s economic growth and is demanding automakers take action. And if they don’t take action, the government has plans to do it for them.
Related: The Company That Started The EV Price War Now Says It’s Gone Too Far
President Xi Jinping gave a couple of speeches recently in which he warned off the dangers of “involution,” where businesses invest ever larger sums of money and get less back. He was referring to the boom in multiple sectors, including AI and computing power, The Guardian reports, but one of the big villains Xi had in mind is the car industry.
Deep Discounts, Rising Concerns
Some car brands in China have cut prices to levels that look simply outrageous in the West. BYD’s Seagull subcompact EV costs as little as ¥55,800 ($7,800) in China, but the same car sold in Europe, where it’s called the Dolphin Surf, costs the equivalent of $26,000. Even allowing for the tariffs placed on Chinese cars being imported to Europe that’s a huge difference.
Though BYD seems profitable, as is Li Auto and Seres, most of the circa-50 Chinese EV brands are not making money and many are expected to disappear over the next few years. Electric car discounts across the industry averaged almost 17 percent in April, compared with just 8 percent during 2024.
The government has proposed an amendment to its pricing laws which could limit automakers’ abilities to set unnaturally low prices.
Factory Floors Sitting Idle
BYD was one of several automakers hauled over the coals last month in front of Chinese officials where they were cautioned about producing too many cars, according to The Guardian. Over-investment has led to overcapacity in the industry, with some automakers’ plants only running at 2 percent utilization or less, Bloomberg reported in June.
One option to prevent oversupply in the Chinese market without choking production is to to export more cars, something that is already happening. Chinese automakers currently sell 5.1 percent of the new vehicles registered in Europe.
Lead image BYD/Wikimedia Commons
