The Chinese government will step in and force the country’s electric vehicle (EV) makers to slow down production, as the growing number of startups threatens to cannibalise the industry.
As reported by the Financial Times, China’s vice-minister of industry and information technology, Xin Guobin, last week warned there is “insufficient external consumer demand” for the country’s EVs in export markets.
This is despite a record 2023 for Chinese vehicle exports, which reportedly saw it dethrone Japan as the world’s largest exporter across a calendar year – shipping 3.83 million cars compared to the latter’s estimated 3.5 million global exports.
The Financial Times reports Mr Guobin has threatened the Chinese government could take “forceful measures” against carmakers and local authorities who embark on ambitious EV projects with next to no consideration of rival manufacturers.
Mr Guobin also remarked “there are also some disorderly competition behaviours” between Chinese EV manufacturers, which threatens to damage the country’s industry.
In a research note written by Louis Gave – and reported by the Financial Times – the automotive industry expert said Chinese EV manufacturers are climbing over each other for market share in the hopes of securing larger loans, eventually funding more production facilities.
“The biggest concern is that the market for EVs has quickly become supersaturated and that a vicious price war is just around the corner,” Mr Gave said.
“Now that automakers have ready access to generous bank credit, the path of least resistance is to try and gain market share and kill off competition by slashing prices and margins.”
The decision for the Chinese government to intervene in the country’s EV production comes as stricter economic policies are placed on the country’s vehicles, particularly in Europe where the local automotive industry is struggling to produce cars as cheaply and with as much technology.
Unsubstantiated claims of China bankrolling EV startups led to an investigation by the EU late last year, but are yet to produce hard evidence of the practice.
As previously reported, Chinese EV specialist BYD beat Tesla for the first time by producing more solely battery-powered cars than the US brand in the fourth quarter of 2023, though the latter firm held onto its annual lead.
Chinese car-makers also helped the country to become the third-most popular exporter to Australian showrooms last year, ahead of South Korea and behind only Japan and Thailand.
