China’s EVs go global as brutal home price war threatens brands

China’s electric vehicle makers are dumping cars overseas while their home turf turns into a financial bloodbath. Ji Yue, once hyped as the next big EV name, collapsed within six months and left people like Li Hongxing with millions in debt.

Li, who runs an ad agency, said he borrowed money to cover campaign costs for Ji Yue in 2024. “It was a feeling of sheer despair,” he said after the company vanished without paying him back. He’s still chasing 40 million yuan, about $5.6 million.

Carmakers squeeze suppliers as margins vanish

Nearly 500 domestic EV brands once crowded China’s market at its peak in 2019. That number has dropped, but over 150 brands and more than 50 EV makers are still stuck fighting to survive. The problem is simple: too many players, not enough profits.

Car companies are locked in endless price wars. They force suppliers to cut prices, extend payment terms, and eat the losses. Some suppliers are still waiting for checks that should have come months ago.

Carl Cheng, an insurance manager in the EV sector, said it plainly: “Suppliers have little choice but to quietly accept unfavorable terms. If you walk away, there are plenty of others ready to step in.” According to him, automakers demand 10% price cuts every year.

One coating supplier in Wuhan dropped prices by 40% just to stay in business. With no margin left, they slashed worker pay by 30% and brought in temps to keep production running.

The obsession with cost-cutting means automakers have stopped caring about innovation. Quality is dropping across the board. And even after cutting corners, profit margins are sinking. Average margins fell to 4.3% last year, down from 8% in 2017.

Half of China’s manufacturing capacity sits unused. Despite that, carmakers keep raising new money to cover losses and stay afloat. “A lot of EV makers are actually running at a loss right now,” said Shen Hong, a researcher at a government-linked think tank.

Li’s experience with Ji Yue is a perfect example. He signed a long-term contract with the brand in May 2024, confident in its future. But by October, he noticed red flags. Ji Yue stopped responding properly. A few weeks later, the company announced it was “restructuring.”

Government cracks down as price war spirals

As exports hit nearly 6 million units last year, making China the world’s top car exporter, foreign governments started pushing back. Europe, Mexico, and Canada all hit Chinese cars with new tariffs and restrictions. Meanwhile, inside the country, the government finally admitted things were out of control.

In a Communist Party magazine this month, Xi Jinping said the price wars needed to stop. Beijing has called in auto execs for warnings, told local governments to pull back subsidies, and ordered carmakers to pay suppliers within 60 days.

But experts aren’t impressed. “Just cutting capacity will not be a perfect solution,” said Chetan Ahya, chief Asia economist at Morgan Stanley. Killing off companies too quickly could trigger mass job losses. China’s auto industry employs over 4.8 million people, and the Party doesn’t want to risk social unrest.

The government also launched an “anti-involution” campaign, targeting what it calls excessive, self-defeating competition. But nothing’s changed much on the ground. Cheng said, “Compared with before, I don’t think the current price war has eased much at all.”

Automakers are finding workarounds, launching cheaper models, offering free upgrades, and skipping the obvious price cuts to dodge government attention.

Claire Yuan, an analyst at S&P Global, said carmakers are likely to keep playing this game. Vincent Sun, from Morningstar, doesn’t see relief coming soon either.

Shen said administrative orders won’t be enough. And Ahya warned that fixing EV overcapacity will be harder than expected since private firms make up the bulk of the sector.

Even He Xiaopeng, founder of leading EV brand Xpeng, admitted on a podcast in August: “I think the knock-out rounds in China’s auto industry will go on for another five years. There will likely be only five of them left.”

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