China Warns EV Industry Against Price Cuts

China is warning the electric vehicle (EV) industry to stop cutting prices, citing concerns about overcapacity and deflation endangering economic growth.

Chinese officials have repeatedly expressed concerns about "entanglement" in sectors suffering from overcapacity, including EVs. President Xi Jinping has criticized local governments for excessive investment in artificial intelligence and new energy vehicles.

BYD and other major automakers have been called to meetings with regulators to receive warnings about overcapacity. Hutong Research notes that government agencies have responded quickly to Xi's remarks, pledging to reduce supply.

China is considering amendments to its pricing law to address price wars, strengthening the government's ability to set price limits and restrict unfair competition. However, some analysts doubt the effectiveness of these measures.

Antonia Hmaidi of Merics notes that few EV companies are profitable in China, and many are linked to local governments that do not want to see them go bankrupt. Increasing exports could exacerbate trade tensions.