Why Beijing is trying to tame China's electric vehicle frenzy

China is conquering the world in electric vehicles. Its automakers produce far more than any other country and outpace them on innovation. China's appetite for petrol-powered cars is fading by the week. In each of the past five months, battery-powered and plugin hybrid cars made up more than half of all cars sold.

- KEITH BRADSHER

But look closer at the industry, and the picture is not pretty. Already, fierce competition among automakers has gotten ruthless, with about 50 automakers fighting for customers by slashing prices again and again. Manufacturers facing ruinous losses are struggling to pay the companies that supply their parts. And yet they keep borrowing from state-run banks to build more factories, leading to extensive overcapacity.

The frenzy has captured the attention of the highest levels of China's government. Officials have started a campaign against "involution," which they define as excessive competition. Xi Jinping, the country's top leader, led a Politburo meeting on the economy July 30 that ended with a statement declaring, "It is a must to reinforce industry self-discipline to prevent vicious 'involution' competition."

The results have been mixed. In early June, under orders from China's Cabinet, 17 automakers agreed to pay their suppliers within 60 days of receiving parts. But a government report on compliance Aug 11 listed only three automakers, all partly or entirely state-owned, as having set up systems for prompt payment.

Even BYD, the world's largest EV maker, is now running into trouble. It said Friday that its profits fell by almost a third in the spring compared with a year ago because of price competition.

Discouraging investment by carmakers has been difficult. Even with a slight slowing in July in response to the government's admonitions, the industry's investments were up 21.7% in the first seven months of the year, compared with the same period in 2024 — the fourth year in a row of torrid growth.