Bubble risk

Electric cars and price war in China, Beijing recalls manufacturers

After Byd reignited the discount race, the government is showing concern: the authorities have summoned the houses and called for 'self-regulation'. Stop opaque practices such as 'zero miles'

5 June 2025

Continua a ritmo intenso l’espansione su nuovi mercati per Byd. Il direttore generale in South Africa Steve Chang posa durante un’intervista con Reuters a Sandton, in Sudafrica, il 4 giugno 2025. REUTERS/Siyabonga Sishi

3' min read

China has rapidly become the world's largest market for electric cars, with almost 8 million registrations of battery-powered vehicles in 2024 compared to less than 2 million in the EU-EFTA-UK area (enlarged Europe). The boost came from aggressive public policies, generous subsidies and a determined strategy towards electrification. The government invested tens of billions of dollars to support innovation, domestic production and demand. Now that model is showing signs of overheating. Some fear a bubble similar to the collapse of Evergrande, the debt-ridden real estate giant, which had systemic effects on the economy and consumption. With over 160 active brands, Beijing is facing an increasingly dangerous price war and a likely bankruptcy phase.

In the past week, the top management of BYD, Geely, Xiaomi and other manufacturers have been summoned to Beijing by three pillars of power: the Ministry of Industry, the antitrust authority and the economic planning agency. The theme: alarm over competition described as 'excessive', which threatens to undermine the entire supply chain.

The issue is simple: in order to defend quotas on the domestic market, whose growth is slowing down, many manufacturers are cutting prices, to the point of selling at a loss. The latest move is BYD, which has offered discounts of up to 34% (valid "until 30 June 2025", a window also closed in Italy at the end of April), provoking a reaction from trade associations and the local media. The China Association of Automobile Manufacturers (Caam) has spoken of a 'vicious cycle' that is jeopardising the profitability and resilience of the supply chain.

BYD's share price, after the tumble on Monday 26 May (-8.6%), following the announcement of the rebates, recovered almost all the way. The discounts, limited to a period, can push volumes and consolidate the leadership of the world's leading electric car brand (Bev+Phev). And in perspective profits. In general, however, the automotive sector has been affected by the new price war winds: the Hang Seng Shanghai-Shenzhen-Hong Kong Automobile Index has lost about 400 points, although it has posted a one-year performance of +34%. There are also cases like Xpeng, which rose strongly this week, mainly due to the announcement of a strategic tech partnership with Huawei.

The authorities have called on companies to 'self-regulate', avoiding excessive discounts and opaque practices such as 'zero mileage' vehicles (sold as used but never driven to inflate sales). Behind this accounting trick lies a more serious problem: the deterioration of liquidity. According to GMT Research, even BYD is delaying payments to suppliers to keep up appearances on its balance sheet. Its real debt, according to this analysis, is ten times higher than declared.

The fact that three power centres acted jointly shows how closely Beijing is following the situation. A disorderly collapse of dozens of manufacturers would damage the international image of 'Made in China', just as Chinese groups are on the runway for a phase of global expansion. It is no coincidence that the regime's media, from the People's Daily to Xinhua, are calling for a 'stabilisation' of the market, warning of the risk of low-priced, low-quality vehicles. The latter is an instrumental argument, given that the Chinese automotive industry in fact shares a large part of the components precisely in order to keep costs down, and the quality is by no means poor.

Despite the premise, the meeting would close without any formal impositions. Just an invitation to change pace. We are faced with a paradox in the Chinese economy: first the state fuels growth, then it declares it wants to slow it down. Too many players and a global competition that pushes to focus everything on exports.

In fact, while Beijing tries to cool down domestic excesses, the number one accelerates abroad. Not only in Europe, where, for example in Germany in May BYD recorded a record result with 1,857 units sold in May, a ninefold growth over the same month in 2024. In the UK, Chinese manufacturers (including Chery's Omoda and Jaecoo, Polestar, Xpeng and Nio) have almost reached 10 per cent market share. And here, too, BYD (+408% in May) is leading the advance, benefiting from the absence of tariffs: the Shenzhen-based manufacturer reached almost 15,000 registered units in the first five months of 2025, with a market share of 2.04% (MG Motor is still ahead with 4.4% but -8.3% in May). While on the Italian market between battery cars and especially plug-in hybrids, the Chinese group has already reached 10.4% cumulative annual share alone. Expansion also sees BYD shine in Brazil, where it rapidly climbs the rankings and approaches Jeep's volumes. Finally, in South Africa, the Shenzhen giant has announced plans to triple its dealer network by the end of the year.

Alberto Annicchiaricovicecaposervizio
Luogo: Milano
Lingue parlate: inglese (C1), buona comprensione di francese e spagnolo
Argomenti: economia, auto, tech, social media, seo, blogging, viaggi, food
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