Is China's EV Industry in Trouble?
It’s good to be back.
I had an awesome holiday in South Korea, getting my annual dose of Kpop and Korean food (I am all Kimchi-ed out now).
This week, I am looking into the troubles in the Chinese electric vehicle (EV) industry as EV players have once again cut prices.
Could $BYD Co., Ltd.(BYDDY)$ actually be building a nightmare?
“Right this way, Mrs Chin. This is the newest EV model by Great Wall Motor. We have recently cut the price by 10%”
Mrs Chin, like many Chinese consumers, just glances over. She then folds her arm and say, “Can you go cheaper? BYD’s one is 20% lower. If not, I will just go next door”
The salesman holds his tongue, smiles and takes out a a list of prices, “Just for you, Madam, we are willing to cut by 25% for you.”
China’s electric vehicle industry is on the cusp.
EV players are still cutting prices left, right and centre in order to gain market share from each other.
And that has resulted in EV prices plummeting to the floor.
However, they are still making more and more, without considering the demand side of it.
In simple economics, if consumers demand more, prices will increase. If companies supply more, prices will drop.
Considering that prices of EVs have dropped even further, I think it’s safe to say that demand is not keeping up with supply.
EV makers are producing more even though less Chinese people are buying.
While EV sales in China are still growing strong, there are already signs it might be slowing.
EV sales growth was at 13.9% in May 2025, lower than 14.8% in April 2025.
In an interview with Chinese news outlet Sina Finance on May 23, Great Wall Motor Chairman Wei Jianjun drew parallels to China’s moribund property sector and its now defunct poster child, developer Evergrande.
“An ‘Evergrande-like’ crisis already exists in the automotive industry,” he said. “It just hasn’t erupted yet.”
And yes, there is a reason to be worried about the sustainability of this price war.
In 2024, China’s average wages grew by just 2.5%, much lower than the historical average of 8.5% from 2016 to 2023.
Margins for EV players are declining sharply due to the price war.
For now, things are set to worsen before any signs of recovery is in sight…
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