China’s EV market is eating itself with price wars

China’s electric vehicle market is in danger of destabilization due to the ongoing price wars by leaders of the industry like BYD.

Last year, Goldman Sachs warned that the ongoing price war in China’s electric vehicle market would only get worse. This year, following a price reduction from one of the industry’s leading players, the EV market in China is again at risk of collapse.

China’s EV market is eating itself with price wars

The price war in China’s electric vehicle industry is the result of aggressive pricing strategies by companies like BYD. The country’s leading EV manufacturer recently reduced prices of over a dozen of its models, including its Seagull hatchback, to 55,800 yuan, approximately $7,765 from the initial offering at nearly $10,000.

These price slashes have put immense pressure on the automaker’s competitors, as they can either follow suit and slash their prices or risk losing market share.

Wei Jianjun, the chairman of Great Wall Motors, was interviewed by Sina Finance. He shared during the conversation that China’s EV sector is in an unhealthy state. Wei also went on to say that the pricing pressure was affecting car companies and suppliers.

He also mentioned Evergrande, a Chinese property developer that was liquidated in 2024 following a major debt crisis.

“Evergrande in the automobile industry already exists, but it has not collapsed,” he said

Tu Le, the managing director of Sino Auto Insights, said the price wars point to a “bloodbath” later this year. He also suggested that weaker companies like Neta and Polestar may not withstand the mounting pressures.

The market is at oversaturation levels

Aside from pricing problems, China’s EV industry is also struggling to deal with oversaturation. The industry has over 169 manufacturers, but with many holding negligible market shares the competition is fierce.

Reuters reported that Chinese regulators are investigating the shady tactic of selling “used cars” that are actually brand new with zero mileage. This practice helps automakers and car dealers meet aggressive sales targets but further destabilizes the already strained automobile industry.

The financial pressure within the industry is already showing on the stock market. BYD’s shares fell by 8.6%, Geely dropped by 9.5%, and others like Nio and Leapmotor experienced losses between the range of 3% and 8.5%.

Some car models have seen price drops of 100,000 yuan in recent years. Suppliers, who are currently being forced to slash their prices, are nearing collapse.

Despite that, tech giants like Xiaomi and Huawei have both ventured into the EV market, taking advantage of their financial stability and technological advantage.

Xiaomi, for instance, reported a 65% increase in adjusted net profit in the first quarter of 2025. The company is now channeling substantial investments into its EV division, even though it is not yet profitable.

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