China vows to rein in EV auto industry

https://ft.com/content/bf4aa7c8-5eb9--909f-b37d

China has said it will rein in expansion of the country’s electric vehicle sector, as Beijing responds to western criticism of its industrial and trade policies that have contributed to a wave of Chinese car exports.

The EU investigation followed complaints that vast subsidies and bank lending from Beijing had underpinned the expansion of Chinese manufacturers.

European companies fear that China is building EV plants far beyond the levels needed to meet domestic demand, following the pattern seen in steel, aluminium and solar panel manufacturing, sectors in which China has squeezed out competition internationally.

While foreign carmakers slow to transition to EVs have been the worst hit by intense competition in China, scores of local companies are also struggling to compete.

“The biggest concern is that the market for EVs has quickly become supersaturated and that a vicious price war is just around the corner,” Louis Gave, an expert with Gavekal Research, wrote in a research note this week.

“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.”