Earlier this week, Chinese officials called in leaders from leading electric vehicle (EV) manufacturers, including BYD, to Beijing to discuss the ongoing price war and related industry issues. The gathering was organized by the Ministry of Industry and Information Technology, the market regulator, and the top economic planning agency, according to sources familiar with the matter who requested anonymity.
Senior executives from over a dozen companies, such as Geely and Xiaomi, participated in the meeting. Authorities urged EV producers to self-regulate, advising them against selling vehicles below cost or engaging in excessive price cuts. The officials also addressed concerns about “zero-mileage” cars—vehicles that are sold before reaching consumers, effectively bypassing standard sales processes—and the growing financial pressures caused by delayed payments to suppliers, which are being used as a form of quasi-debt financing for automakers.
This joint intervention from China’s industry, market, and economic regulators is notable, as it is uncommon for them to collaboratively address operational pricing issues within the auto sector. The move underscores the high level of government concern over the sustainability of the price war, which risks forcing weaker companies into bankruptcy.
However, the meeting did not impose any mandatory directives, and it remains unclear what specific actions, if any, manufacturers will face if they ignore the verbal warnings. Representatives from BYD and Xiaomi declined to comment, while Geely’s spokesperson referenced a recent statement from Chairman Li Shufu, who emphasized the company’s rejection of price wars, opting instead to compete through technological innovation and core values.
The Ministry of Commerce stated that it will collaborate with other departments to enhance guidance for the automotive industry, promote fair competition, and foster healthy sector development.
Following BYD’s recent discount campaign, which offered cuts of up to 34% and ignited industry criticism, stocks of Chinese automakers declined. BYD’s shares fell up to 2.7%, Xiaomi’s by 2.4%, and Geely’s Hong Kong-listed stock by 1.7%.
The warnings come amid a broad industry backlash. The China Automobile Manufacturers Association condemned BYD’s aggressive discounting, claiming it sparked a “price war panic” that threatens the entire supply chain and could lead to a “vicious cycle” of destructive competition and shrinking profit margins. State-controlled media outlets, including Xinhua, People’s Daily, and CCTV, have recently called for automakers to cease discounts and restore order to the market. The People’s Daily warned that persistent discounting could harm China’s international reputation by producing low-quality, low-cost products that undermine the “Made-in-China” brand.
Additionally, the meeting addressed issues surrounding “zero-mileage” cars, where automakers offload unsold vehicles—often to supply chain finance companies or used car dealers—without they ever reaching customers, allowing manufacturers to record sales prematurely. The Ministry of Commerce has recently held meetings with major automakers and online used-car platforms to discuss this practice.
Compounding the industry’s financial strain, automakers have been demanding lower component prices and delaying supplier payments, further stressing the supply chain. Notably, BYD’s late 2023 request for lower prices from a key supplier drew scrutiny, raising concerns over whether the company is using supply chain financing methods to mask mounting debts. According to GMT Research, BYD’s actual net debt could reach approximately 323 billion yuan ($45 billion), a significant increase from the official figure of 27.7 billion yuan reported as of June 2024, indicating substantial deferred payments and related financing activities.
Overall, the meeting signals heightened government vigilance over the sector’s pricing strategies and financial health amid ongoing industry challenges.
