The fierce competition between Chinese automakers has become a serious threat to the entire national economy by driving down prices. Concerned about this situation, the Chinese government is warning automakers to “restrain themselves.”
The Chinese have lowered car prices
Chinese car brands, which have gained market share globally, are also facing fierce competition in their own domestic market. However, this competition is now reaching uncontrollable levels. Volkswagen’s China manager, Ralf Brandstätter, stated, “There’s no logic left in the Chinese car market,” highlighting the seriousness of the situation. The Chinese government is also concerned about this unhealthy situation.
According to The New York Times, the Chinese government met with executives of automakers whose profit margins have slashed to dangerous levels. The government urged companies to be more vigilant when competing, as these price cuts are eroding not only individual companies but also the profit potential of the entire industry. Experts say this trend will lead to the bankruptcy of many companies within five years, damaging the entire Chinese economy.
Concern about this situation has been voiced at the highest levels. At a Politburo meeting on July 30th, Chinese President Xi Jinping stated, “It is essential to strengthen self-discipline within the industry and prevent destructive internal competition.” This direct intervention demonstrates the government’s commitment to this issue.
Today, more than 50 companies compete in the Chinese electric car market, and this number is growing daily. This competition is driving prices to plummet. Even BYD, one of the largest players in the market, announced a nearly 30% loss in revenue compared to the previous year due to falling prices.
According to analysts, Chinese car companies are no longer fighting for profit, but for survival in this fierce competition. Automobility analyst Bill Russo summarizes the situation by saying, “This is not a race for profit, but a race for dominance.” Many companies are pricing at a loss. Their survival depends on loans from state-backed banks. Therefore, the government’s warnings could have serious consequences.
However, if China fails to stop this uncontrolled competition, it could face a serious crisis. Bankrupt companies, debts owed to state banks, and tens of thousands of unemployed engineers could have devastating consequences for the Chinese economy. Xi Jinping’s direct involvement in the matter is seen as the most compelling evidence of these concerns.
