13:28 18-09-2025

China's auto industry glut sparks price wars and an EV shakeout

China's car industry, built up by government policy and subsidies into the world's largest, has run into a deep crisis. Factories are turning out nearly twice as many vehicles as the market can absorb: 31 million produced in 2024 against more than 60 million in installed capacity. The result is price undercutting, brand erosion and widespread losses.

In Chengdu, FAW models are being sold at up to 60% off list, while Audi is discounted by as much as 50%. Dealers are swamped with stock they cannot move and, to unlock factory incentives, have resorted to booking sales on paper by registering and insuring cars that never reach real buyers. Unmoved inventory flows to informal traders, shows up on streaming platforms, or ends up in storage lots that amount to car graveyards. The fire-sale tactics may grab attention, but they risk training customers to wait for deeper cuts, worsening the glut.

Analysts compare the pattern to the slumps that followed booms in property and solar power: policies meant to support jobs and tax revenue have hollowed out margins. It is a familiar arc, and the signs are hard to miss.

AlixPartners expects that of 129 electric and hybrid brands, only 15 will still be around by 2030. Neta (Hozon Auto) is already in bankruptcy proceedings, while Ji Yue (Baidu and Geely), WM Motor, Aiways, Skyworth Auto, Leapmotor and Zotye are in distress. The core weaknesses are thin retail networks, fragile consumer trust and reliance on subsidies.

The danger stretches beyond Chinese manufacturers to global trade. Europe fears a wave of low-priced EVs, and the United States has effectively shut them out. Chinese authorities have begun talking about reining in price wars, yet without a broad exit of weaker players the industry risks locking itself into a vicious loop. The direction of travel looks clear: consolidation is no longer optional but inevitable.