The Great EV Reckoning: What's Happening in China's Auto Industry

Gabriele Iuvinale
6 giu
Tempo di lettura: 10 min

The Chinese electric vehicle market is undergoing a drastic restructuring, with hundreds of startups ceasing operations and a future dominated by a limited number of major players. Between 2018 and 2025, a staggering 400 Chinese EV companies closed their doors, a natural culling in a market that boasted over 500 startups in 2018, many of which lacked solid foundations. Analysts predict that by 2030, fewer than 50 companies will survive.
This wave of failures was triggered by the gradual phasing out of generous state subsidies starting in 2020 and the escalation of a brutal price war, led by giants like BYD and Tesla. The pressure on profit margins has extended throughout the entire supply chain, even impacting large dealerships like Qiancheng Holdings (BYD), which has closed numerous outlets.
Despite internal challenges, China maintains its position as a global leader in EV innovation and exports, with declining battery costs and significantly reduced model development times. However, overcapacity and the resulting "dumping" strategy are sparking protectionist reactions, leading to the introduction of tariffs in Europe and North America.
Facing this critical situation, Chinese authorities have intervened, summoning major manufacturers to urge greater "self-regulation" and to end unsustainable practices such as selling below cost and "zero-mileage" financing. The goal is to stabilize a turbulent sector and ensure fairer competition, as the market prepares for a future dominated by leaner, more strategic brands ready for global leadership.

Earlier this week, Beijing summoned executives from major electric vehicle (EV) manufacturers, including BYD, Geely, and Xiaomi, to address growing concerns about the ongoing price war. The meeting, co-hosted by the Ministry of Industry and Information Technology (MIIT), China's main economic planning agency and market regulator, marked an unusual coordinated move by Chinese authorities in the automotive sector.

The Meeting's Context: Self-Regulation and Sustainable Business Practices

During the meeting, which included executives from over a dozen manufacturers, officials urged companies to practice "self-regulation," advising them against selling vehicles below cost or offering unreasonable price cuts. This appeal comes at a time of intense competition, exacerbated by the latest round of massive discounts initiated by BYD, with reductions reaching 34% on some models, drawing criticism from industry bodies and state media.

Beyond pricing, the meeting addressed other problematic practices, such as "zero-mileage" cars and inflated supplier invoices, which are squeezing cash flow throughout the supply chain and acting as quasi-debt financing for automakers. "Zero-mileage" cars refer to the practice where manufacturers, failing to meet sales targets, offload new vehicles to supply chain financing companies or used car dealerships. These essentially new vehicles are then put onto the used car market with no mileage, but manufacturers register them as sales, despite not yet reaching the end consumer. This is the second time in a few days that industry leaders have been called out for this practice.

China's Dominance in the EV Sector: Enabling Factors and Hidden Problems

China has become a global leader in EV production and exports due to a mix of strategic factors. These include massive state support, strong domestic supply chains, product innovation, and, according to some sources, also intellectual property (IP) theft and forced technology transfers.

The Chinese government, at both federal and provincial levels, has made EV competitiveness a national priority. This drive stems from the realization in the mid-2000s that Chinese companies would struggle to become globally competitive within the dominant internal combustion engine (ICE) technology paradigm. Therefore, Chinese leaders identified EVs as a revolutionary, or "leapfrog," technology that would enable China to develop a globally competitive domestic industry, while also breaking the country's reliance on foreign automotive technologies and, crucially, the ICE car imports (and their oil) that this entailed.

Beijing has invested heavily in the EV sector through subsidies, tax breaks, and procurement contracts, fostering a robust domestic ecosystem. From 2009 to 2023, domestic EV and battery manufacturers benefited from over $230 billion in subsidies, in addition to local content requirements. The government's "Made in China 2025" initiative further stimulated growth by identifying the automotive economy as a strategic asset. A Nikkei Asia analysis found that five of the top 10 companies receiving the largest subsidies from the Chinese government in the first half of 2023 were local EV or battery manufacturers, with BYD Auto receiving 1.78 billion yuan and SAIC Motor over 2 billion yuan.

However, this state support, especially from local Chinese administrations, has also generated enormous problems for the domestic automotive industries, sparking a price war largely due to overproduction (dumping).

Chinese automakers produce 21% of the world's passenger vehicles (a figure analysts estimate will reach 33% by 2030), and in 2022, they produced 62% of the world's EVs and 77% of EV batteries. From 2020 to 2023, China's global EV exports surged by 851%, with nearly 40% of these exports destined for Europe. The global share of patents held by Chinese entities in electric propulsion also increased, from 2.4% in 2010 to 26.9% in 2020.

Drastic Restructuring of the Chinese EV Market and Pressure on Dealerships

The Chinese EV boom has transformed into a drastic restructuring. The explosion of Chinese EV startups was fueled by generous subsidies, tax breaks, and easy access to local production licenses between 2015 and 2019. According to the International Energy Agency (IEA), this led to an overcrowded market of over 500 companies around 2018, many of which lacked core technology, supply chains, or scale.

From 2020 onwards, the Chinese government began phasing out its EV subsidy program. This policy shift occurred just as the country entered a price war, driven by aggressive pricing from giants like BYD and Tesla. The combination of reduced state support and brutal price competition proved fatal for many underfunded startups.

Between 2018 and 2025, 400 Chinese EV companies ceased operations. Examples of EV startups that have failed or exited the market include:

HiPhi (Human Horizons): Production halted in 2024 due to financial and operational issues.
WM Motor: Declared bankruptcy after failing to raise new capital and losing investor confidence.
Byton: Closed before mass production began due to internal turmoil and overspending.
Singulato Motors: An early successful brand that quickly disappeared due to financial difficulties.
LeEco EV: Collapsed due to massive debt tied to its controlling tech conglomerate.
Levdeo: Struggled to transition from low-speed EVs to larger models and exited the market.
Bordrin Motors: Declared bankrupt in 2021 after COVID-related shocks decimated demand.
Saleen China: Project failed due to legal and financial scandals.
Qiantu Motors: Failed to bring its K50 electric sports car to sustainable volume.

Despite the collapse of hundreds of brands, China remains the world's most innovative and rapidly evolving EV ecosystem. This is demonstrated by:

Battery costs falling to $50-85/kWh, well below Western levels.
New battery technologies, such as BYD's 10C and CATL's 12C, now enabling ultra-fast charging in 8-10 minutes.
Chinese automakers bringing new models from concept to production in just 18 months, compared to 36+ months needed in Europe.
EVs in China are already cheaper than gasoline cars, accelerating their large-scale adoption.

By 2025, only about a hundred of these brands are expected to remain active. McKinsey analysts predict that fewer than 50 Chinese EV companies will survive by 2030. This is not just a story of collapse, but also of market maturation, consolidation, and strategic realignment. The closure of EV factories and dealerships has led to job losses in China.

In this scenario, the pressure also extends to retailers. A large BYD EV retailer, Qiancheng Holdings, which operated stores in Shandong province, closed its doors in late May, leaving at least 20 of its outlets deserted or shut. Qiancheng's situation highlights the increasing pressure on China's automotive market, the world's largest, as intensifying competition strains suppliers, automakers, and dealerships. Car dealerships have been particularly vulnerable to the industry's shift towards direct sales and slowing consumer spending. Although BYD has a limited number of wholly-owned stores in China, it primarily relies on dealerships in that market.

In summary, the Chinese EV market is undergoing significant consolidation, with many smaller manufacturers facing bankruptcy or restructuring due to a combination of factors, including fierce competition, the end of subsidies, and changing consumer preferences. Chinese manufacturers are increasingly focusing on exporting their vehicles to international markets to find new opportunities and mitigate fierce domestic competition. Only the strongest — and smartest — will remain. Brands like BYD, Sangan, SAIC, GAC Motors, Geely (including Zeekr and Lynk & Co), Nio, Xpeng, Zeekr, Li Auto, Leapmotor, Aito, Avatr, IM Motors, Xiaomi, Denza (part of BYD), Hozon Auto (Neta), SERES, Chery New Energy, and JAC Motors have the scale, capital, and innovation advantage to compete globally. Many are investing in local production in Europe, strategic alliances, and flexible product architectures to manage political risks and regional demands. Even if up to 450 brands disappear by 2030, those that remain will be leaner, more strategic, and ready for global leadership in a maturing EV landscape.

The Rare Government Intervention and Its Implications

The joint organization of a meeting on operational issues like pricing by China's market, industry, and economic regulators is a rare event. This move underscores the level of control top management is exerting over the sector, fearing that the price war is becoming unsustainable and could lead to the failure of weaker companies.

The China Automobile Manufacturers Association, without naming BYD, issued a statement saying that one company's move had triggered a new wave of "price war panic," pushing the industry into a "vicious cycle" and threatening the security of the supply chain. The association stressed that "disordered price wars intensify fierce competition, further compressing companies' profit margins."

Even media directly controlled by the Communist Party leadership, including Xinhua, People's Daily, and state broadcaster CCTV, published reports urging automakers to halt discounts and restore order in the industry. People's Daily warned that such conduct could lead to the creation of low-priced, low-quality products, damaging China's international reputation and the "Made in China" image.

Impact on Global Markets and International Reactions

The collapse of many Chinese EV manufacturers could have repercussions for the global market, causing disruptions in supply chains and impacting consumer confidence, particularly in developing countries where affordable EVs are essential.

Many countries are willingly accepting low-cost Chinese EVs, indicating that China's market share is set to increase, displacing existing suppliers in those markets and reducing foreign automakers' revenues. By exploiting existing regulatory gaps in WTO rules, China often distorts global markets by flooding them with low-priced goods, as has already happened in the steel and aluminum sectors, where it now leads with over half of global production. Overcapacity is now a tangible concern in the Chinese automotive sector as well.

The effects of this dominance are already visible. The market share of foreign automakers in China has dropped from 53% to 33% in the last two years. Companies like Toyota, Mitsubishi, GM, Ford, Tesla, Volkswagen, BMW, and Honda have recorded significant sales declines and, in some cases, workforce and production cuts in China. Mitsubishi announced the cessation of car production for the Chinese market through its local joint venture. Michael Dunne, CEO of Dunne Insights, stated that "the glory days of high sales growth and massive profits in China are over" for mass-market brands.

Chinese EV manufacturers are not content with domestic success alone. The country's passenger car exports soared by over 60% last year, reaching 4 million units, making China the world's largest car exporter, surpassing Japan and Germany. More than a quarter of these exports are EVs. Companies like Nio and SAIC Maxus are aggressively expanding their global presence. Nio plans to enter 25 countries and regions this year, while SAIC Maxus aims to expand into 100 countries by the end of 2024, with annual overseas sales projected to exceed 100,000 units. The SAIC Group announced its intention to launch 17 new global models and pursue localized production plans.

According to UBS forecasts, by 2030, Chinese automakers could double their global EV market share to about one-third, with European companies suffering the largest market share losses. This potential "damage" has triggered a wave of tariff increases on Chinese vehicles from Europe and North America, but it is unclear whether higher import duties will be enough to stem the assault.

Reactions and Immediate Consequences

Despite the severity of the warnings, the meeting did not result in a binding directive, and the consequences for manufacturers failing to heed the verbal warnings remain unclear.

BYD and Xiaomi did not comment on the meeting. A Geely representative referred to a recent speech by Chairman Li Shufu, who stated that the company "firmly rejects price wars" and will "compete on technology and its values."

The Ministry of Commerce, during a briefing on Thursday, stated that it will work with other departments to strengthen guidelines for the automotive industry, ensure fair competition, and promote healthy development.

Following these reports, shares of Chinese automakers fell across the board on Friday. BYD shares dropped up to 2.7%, Xiaomi's declined by 2.4%, and Geely lost 1.7% in Hong Kong.

Pressures on Suppliers and Hidden Debt Concerns

Automakers have sought to offload the burden of the price war onto suppliers, demanding lower component prices and delaying invoice payments for months. A price reduction request by BYD to one of its suppliers late last year drew media attention and raised concerns about how the EV giant might be using supply chain financing to mask its growing debt.

A report by accounting consultancy GMT Research estimates BYD's effective net debt to be around 323 billion yuan ($45 billion), a figure significantly higher than the 27.7 billion yuan officially recorded in its books at the end of June 2024. This discrepancy is primarily attributed to delayed payments to suppliers and other related financing, highlighting a potential financial vulnerability in the sector.

Current Headwinds and Future Outlook for Chinese Automotive

The Chinese automotive market experienced a 22% decline in February 2025 compared to January, although it saw a 26% year-on-year increase. This indicates strong volatility and a continuously evolving market.

In particular, the price war continues to rage. BYD recently cut prices on 22 electric and plug-in hybrid models, a move pushing competitors to follow suit, intensifying pressure on profit margins. The China Association of Automobile Manufacturers has once again urged companies not to monopolize the market through below-cost sales or misleading advertising, reiterating the need for fair competition.

Despite internal challenges, China continues to strengthen its position as a leader in global automotive exports, with a growing focus on Europe. However, this success clashes with the "problem" of tariffs, which do not appear to be slowing the assault of Chinese cars. Russia and Belarus remain key markets for Chinese automotive exports, while the United States represents a marginal market.

In China, electric vehicle (BEV) sales accounted for 24.54% of total sales in 2024. Although forecasts indicate that EV sales will surpass traditional car sales by the end of 2025, the Chinese domestic market is still partly dominated by internal combustion engine vehicles, making exports even more crucial for EV manufacturers.

In conclusion, the joint intervention by Chinese authorities in the EV sector highlights a growing concern for the sustainability of the price war and its ramifications across the entire supply chain. While authorities aim to foster a healthier competitive environment, it remains to be seen whether verbal warnings will suffice to alter aggressive pricing strategies and ensure the long-term stability of the Chinese EV industry. The drastic restructuring of the domestic market, marked by the closure of hundreds of startups and difficulties faced by even large retailers like Qiancheng Holdings, indicates that the Chinese EV sector is undergoing a critical phase of consolidation.