China Warns Electric Vehicle Makers Against Price Wars to Safeguard Economy
Beijing, Tuesday, 5 August 2025.
China urges EV manufacturers to stop aggressive price cuts, citing risks of overcapacity and market ‘involution’ that threaten economic stability amid fierce competition.
China’s Economic Concerns Amid EV Price Wars
On August 5, 2025, the Chinese government explicitly warned electric vehicle (EV) manufacturers against aggressive price-cutting strategies that are threatening the stability of the EV market. This practice, which officials label as creating ‘involution’, is contributing to overcapacity and oversupply in the market, thereby putting the sector’s and, by extension, the nation’s economic health at risk [1].
Government Strategy and Industry Dynamics
In a move to mitigate the risks associated with these price wars, the government is drafting a new amendment to its law on pricing. This revision aims to enhance the government’s ability to set price limits and curb unfair competition practices [1]. President Xi Jinping has squarely placed responsibility on provincial governments for overinvesting in industries such as new energy vehicles, underscoring a call for more controlled and sustainable industrial expansion [1].
Impact on the Electric Vehicle Market
The fierce competition in China’s EV market has already led to significant fluctuations in sales figures for some of the major players. For instance, BYD reported a 10% drop in sales in July 2025 compared to June, marking its first decline for the year [1]. Similarly, Tesla’s sales of China-made EVs fell by 8.4% year over year, as both domestic and international fierce competition takes its toll [3].
Future Measures and Market Outlook
The new legislative measures set to be implemented as part of the government’s strategy signify a critical turning point in maintaining price stability within the market [1][3]. In parallel, Chinese EV manufacturers like XPeng and Leapmotor have displayed resilience, achieving significant sales growth in spite of challenging market conditions, signaling a complex and competitive future landscape [4].