Escalating concerns in China's ministry over EV price wars

China’s Ministry of Industry and Information Technology (MIIT) has issued a warning to automakers involved in aggressive price wars. The ministry vowed to crack down on what it describes as “involution-style” competition threatening the country’s fast-growing electric vehicle (EV) and auto sectors. 

The statement, issued on Saturday, comes shortly after the China Association of Automobile Manufacturers (CAAM) launched an industry-wide initiative urging auto companies to preserve fair competition and avoid practices that could destabilize the market.

The MIIT said it will step up regulatory oversight and intervene where necessary to restore order to the market.

Escalating concerns over China’s EV price wars

At the core of MIIT’s warning is the escalating discount frenzy that has swept across China’s EV landscape. Over the past year, automakers, from EV leader BYD, to traditional players like Geely and Chery have slashed prices on dozens of models to hold or grow market share.

BYD, for instance, cut prices across more than 20 models in late May, setting off a new wave of markdowns throughout the industry.

The MIIT’s intervention is a deviation from the norm for how China manages its production sector. The regulatory approach for the auto market appears to have gone from fostering growth at any cost to ensuring long-term sustainability and quality across its strategic industries, including new energy vehicles (NEVs), which now account for over 40% of new car sales in the country.

The CAAM echoed the ministry’s concerns in a statement last week. While it acknowledged the impressive growth of the NEV sector, the association said profitability is declining due to the rise of destructive pricing tactics. While competitive pricing is legal and expected, the group cautioned that it should not come at the expense of industry fundamentals.

Tu Le, managing director of Sino Auto Insights, provided insights into the ongoing price wars, stating that the current pricing strategies could lead to a “bloodbath” later this year, particularly affecting weaker players like Neta and Polestar.

Industry analysts say the MIIT’s intervention is timely, though the effectiveness of its new regulatory push remains to be seen. Some fear that without enforceable penalties or an overhaul of pricing policies, companies may continue prioritizing volume over value.

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