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China's EV market suffers from the 'brutal competition' of too many entrepreneurs and engineers, says top China watcher

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  Published in Sports and Competition on Monday, October 27th 2025 at 4:45 GMT by Insider
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China’s EV Market Faces a Brutal Slump as Prices Plunge and Competition Intensifies

China’s electric‑vehicle (EV) sector, once the world’s fastest‑growing automotive market, has entered a period of stark contraction. The latest data from the China Association of Automobile Manufacturers (CAAM) reveal that new‑energy vehicle sales fell 22 % year‑over‑year in the first quarter of 2024, dropping to roughly 1.7 million units from 2.2 million in the same period a year earlier. This sharp decline marks the first significant dip since the sector hit record highs in 2021, when the country registered over 6 million EVs on the road.

The slowdown is driven by a confluence of factors. First, the Chinese government’s phased‑out subsidy programme, which had lifted EV prices and expanded consumer access, has now largely disappeared. With subsidies trimmed from an average of RMB 7,500 (US$ 1,000) per vehicle in 2021 to virtually none in 2024, automakers are forced to compete on price. Second, a flood of domestic entrants—many of whom have scaled production rapidly in the past two years—has intensified competition, leading to aggressive price cuts. Third, consumer sentiment has cooled amid broader economic uncertainty, with buyers now weighing EVs against the lower cost of conventional vehicles.

Price War Across the Domestic Landscape

By 2024, the top four domestic EV makers—BYD, NIO, Xpeng, and Li Auto—had all reduced prices by between 10 % and 20 % in response to falling demand. BYD, which had been the market leader with a 24 % share, saw its share slip slightly to 23 % as NIO reclaimed 9 % of the market, while Xpeng and Li Auto each gained 3 % in market share. The price wars have eroded margins, with BYD’s 2023 revenue falling 3 % YoY despite a 5 % increase in production volume.

“We are witnessing a new phase of consolidation,” noted BYD’s chief financial officer in a recent interview. “The market is no longer about volume alone; profitability and after‑sales service will become critical differentiators.”

Impact on the Supply Chain

The ripple effects of the slowdown are felt across the entire supply chain. Battery manufacturers such as CATL and SK Innovation report a slowdown in orders, with CATL’s quarterly revenue growth projected to lag behind its 2023 growth of 12 % by at least 5 %. OEMs, in turn, are scaling back production to avoid inventory pile‑ups, further straining component suppliers.

Moreover, the global shift toward higher‑capacity, longer‑range batteries—necessary for consumers’ growing expectations of EV performance—has introduced additional cost pressures. The current emphasis on battery technology advancement, coupled with a tighter supply of critical materials such as cobalt and lithium, has left manufacturers scrambling to balance cost with competitiveness.

Regulatory Shifts and Consumer Perceptions

The Chinese regulatory landscape is also shifting. In April 2024, the Ministry of Industry and Information Technology announced a “new energy vehicle quality and safety standard” that will raise the bar for safety features and battery reliability. While the aim is to protect consumers, the new requirements are expected to raise production costs further, prompting some automakers to consider consolidating product lines or postponing new launches.

Simultaneously, consumer perceptions of EVs are evolving. In 2023, a survey by China’s Auto Information Service Center found that only 40 % of potential buyers considered an EV the best option for their next vehicle purchase, a decline from 55 % in 2022. The drop is attributed largely to the perception that EVs are expensive and that battery degradation concerns have not been fully addressed.

Strategic Responses and Future Outlook

In response to the downturn, several major players are recalibrating strategies. NIO, which had a record 200,000 units sold in the last quarter, announced a new “NIO Power” service model that focuses on battery leasing and long‑term support, aiming to offset declining sales with recurring revenue streams. Xpeng has also shifted its focus toward “smart” features, incorporating advanced autonomous driving modules and integrated services to differentiate its vehicles in a crowded market.

BYD, meanwhile, is exploring international expansion, targeting Southeast Asian markets where battery prices remain lower and consumer appetite for EVs is rising. Li Auto has announced a partnership with a leading electric powertrain manufacturer to accelerate the development of its next‑generation hybrid platform, positioning the brand as a “bridge” between traditional internal combustion engines and full electrification.

The Chinese government, for its part, is maintaining a cautious stance. While it continues to promote EV adoption through non‑subsidy incentives, such as preferential licensing and charging infrastructure expansion, it has signaled that further subsidies will likely be phased out over the next few years.

Conclusion

China’s EV market has entered a painful but potentially transformative phase. The collapse in sales, driven by price wars, regulatory tightening, and shifting consumer sentiment, has forced domestic manufacturers to confront the stark reality that growth will no longer be driven simply by volume. Instead, the sector must pivot toward profitability, quality, and service excellence to secure its place in a rapidly evolving automotive landscape. As the industry navigates these challenges, the next few years will prove decisive in determining which brands can adapt and thrive in a market that has long been a bellwether for global EV trends.