Why China is trying to tame its electric car frenzy

China is conquering the world in electric vehicles (EVs). Its carmakers produce far more than those in any other country and outpace them on innovation.

- Keith Bradsher

SHENZHEN, China — China is conquering the world in electric vehicles (EVs). Its carmakers produce far more than those in any other country and outpace them on innovation.

China's appetite for petrol-powered cars is also fading by the week. In each of the last five months, battery-powered and plug-in hybrid cars made up more than half of all cars sold.

But look closer at the industry, and the picture is not pretty. Already, fierce competition among carmakers has become ruthless, with about 50 carmakers 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.

Chinese President Xi Jinping led a Politburo meeting on the economy on 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 carmakers agreed to pay their suppliers within 60 days of receiving parts. But a government report on compliance in August listed only three carmakers, 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 in August that its profits fell by almost a third in the spring compared with a year ago because of price competition.