China’s government is urging electric vehicle (EV) makers to rein in steep price cuts that officials fear could destabilize the industry and slow economic growth, The Guardian reported.
The warning comes after President Xi Jinping highlighted the risks of “involution,” a cycle where businesses invest heavily with diminishing returns, pointing to sectors such as automotive manufacturing, AI, and computing power.
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China’s EV market has seen discounts reach levels far beyond those in overseas markets. BYD’s Seagull subcompact EV, for example, sells for about ¥55,800 ($7,800) domestically but costs around $26,000 in Europe, where it is branded as the Dolphin Surf. According to industry data, average discounts across the sector hit 17% in April, compared with 8% in 2024.
While companies such as BYD, Li Auto and Seres have remained profitable, most of China’s approximately 50 EV brands are still unprofitable, and several are expected to exit the market in coming years. Overinvestment has also left production plants running at minimal capacity, with Bloomberg reporting in June that some facilities were operating at just 2% utilization.
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Officials last month summoned automakers, including BYD, to warn against excessive production and price cuts. A proposed amendment to pricing laws could restrict automakers’ ability to set abnormally low prices.
One option under consideration is boosting exports to reduce domestic oversupply. Chinese automakers already account for 5.1% of new vehicle registrations in Europe, a share that is rising as manufacturers look beyond a crowded home market.