China Business
China's uneven growth: Exports surge as consumption falters
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China’s NEV sector is in the midst of another intense round of price wars. BYD, the market leader, has slashed prices by up to 30% in recent months. These aggressive cuts have rippled across the industry, pushing the average profit margin for automakers to just above 4% in early 2025 — the lowest point in recent history. In a bid to maintain momentum in a cooling economy, automakers are sacrificing margins to preserve volume.
The pressure to hit ambitious sales targets has led to mounting distortions in the market. BYD’s push has resulted in excess inventory being pushed onto dealerships. Many dealers, unable to move this stock through conventional channels, have resorted to selling new vehicles as “zero-mileage used cars.” This workaround allows them to bypass certain sales constraints, but in doing so, it blurs the accuracy of official sales data. Rival manufacturers have voiced their concerns, accusing BYD not only of distorting the market but also of violating national emission standards.
These allegations have not gone unnoticed. The Ministry of Commerce has reportedly held talks with both BYD and Dongfeng. Just days later, on June 9th, the Ministry of Industry and Information Technology launched a product quality inspection. Although no specific company was named, the inspection targets vehicles that have “attracted public attention,” a likely reference to the ongoing disputes. The move signals that regulators are starting to respond to the growing tensions in the sector.
The Chinese government now faces a complex policy dilemma. On the one hand, the 2025 Government Work Report highlights the need to curb “involuted competition” — the kind of destructive undercutting and market manipulation that undermines healthy growth. On the other hand, stimulating demand remains an overriding economic priority. With the broader economy slowing, authorities are cautious about any intervention that might dampen consumer activity or stall industrial momentum.
Amid this policy tug-of-war, quality and safety-related concerns are more likely to trigger immediate regulatory action. This creates a strategic opening for automakers that focus on building trust through product reliability, durability, and high-tech differentiation. As regulatory scrutiny increases, companies that align with these priorities may gain a competitive edge — not just through compliance, but by positioning themselves as long-term leaders in a maturing market.
