The Impact of Price Wars on China's Electric Vehicle Industry

China's electric vehicle (EV) market has experienced significant turmoil, characterized by intense price wars and a wave of bankruptcies among manufacturers. The collapse of Ji Yue, a startup backed by Baidu and Geely, exemplifies the precarious state of the industry. Founded in 2021, Ji Yue quickly gained attention but succumbed to liquidity issues within a year, leaving its partners and suppliers, like Li Hongxing, facing substantial financial losses.

CNN

The aggressive competition in China's EV sector has led to a dramatic decline in profit margins, with average profits plummeting from nearly 8% in 2017 to 4.3% last year. This environment has forced many automakers to prioritize cost-cutting over innovation, resulting in a decline in product quality. Suppliers report being pressured to offer discounts of at least 10% annually, leading to reduced wages and increased reliance on temporary labor.

CNN

In response to the chaotic competition, the Chinese government has implemented measures aimed at stabilizing the market. These include summoning industry leaders to discourage price wars, shortening payment cycles, and urging local governments to reduce subsidies. However, experts express skepticism about the effectiveness of these initiatives, citing the potential for job losses and further economic stagnation if excess capacity is eliminated without a strategic plan.

How Do Chinese Brand Electric Vehicles Stay So Cheap? A Supply Chain Deep Dive

State-owned enterprises are also adapting to the changing landscape by embracing home-grown technologies and forming partnerships with domestic firms. Despite their efforts, only four state-backed carmakers rank among the top ten EV manufacturers in China, as private companies like BYD and Geely continue to dominate the market.

South China Morning Post

While the Chinese EV sector saw record sales in the first half of 2025, concerns about oversupply and ongoing price competition persist. The government has introduced an “anti-involution” campaign to combat excessive competition, yet industry insiders remain doubtful about the long-term viability of many brands. Analysts predict that the current price wars may continue for several more years, potentially leaving only a handful of manufacturers standing.

CNN

• “It was a feeling of sheer despair,” — Li Hongxing, Social Media Ad Agency Owner

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• “Those are definitely good starting steps, and that needs to happen,” — Chetan Ahya, Chief Asia Economist at Morgan Stanley

CNN

• “The reality is that newly launched models with lower prices draw in plenty of orders…” — Carl Cheng, Insurance Manager for an EV Maker

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• “When it comes to price wars, it’s just not very realistic to think they can be completely curbed through administrative measures,” — Shen Hong, Economics Researcher at Peking University

CNN

The Chinese electric vehicle industry is at a crossroads, facing the dual challenges of fierce competition and government intervention. While the market has grown rapidly, the sustainability of this growth remains uncertain as companies navigate the complexities of price wars and economic pressures. The future of the industry will depend on the ability of manufacturers to adapt to changing market conditions while maintaining quality and innovation.

How Do Chinese Brand Electric Vehicles Stay So Cheap? A Supply Chain Deep Dive