A fierce price war continues to engulf China’s automotive sector despite stricter measures aimed at curbing what officials call “disorderly” competition, underlining the challenge of tackling the country’s chronic overcapacity.
Passenger car sales rose 16.5% on the year in August to 2.54 million vehicles, up from 14.7% in July, according to data released by the China Association of Automobile Manufacturers on September 11. The growth was fueled by government subsidies, the launch of more affordable models, and rising demand abroad.
BYD remained firmly at the top of the market, but its sales growth showed signs of slowing. Its total sales of new energy vehicles (NEVs), which include pure electric vehicles as well as plug-in hybrid cars, inched up just 0.1% from a year earlier to 371,501 vehicles.
“We think vehicle volume growth will slow down this year, due to a high 2024 base and a lack of attractive new model launches in a competitive market,” research specialist Morningstar said in a recent report.
Geely ranked second, nearly doubling its NEV sales to 147,347 vehicles and overtaking Tesla, whose sales fell 4% to 83,192 vehicles, according to separate data released by the China Passenger Car Association (CPCA).
Chinese carmakers dominated the NEV market, which accounted for 55.1% of domestic sales, but their long-term survival is far from guaranteed.
Li Auto, which ranked fifth last August, dropped out of the top ten following a lackluster customer response to its new i8 SUV launched in July. The company quickly replaced three variants of the SUV with a single version priced at RMB 339,800 (USD 47,572) just a week after the launch in an effort to soften the blow.
Nio boosted its sales by more than 50%, helped by strong demand for its new L90 SUV, which came out around the same time as Li Auto’s latest model. The L90 retails for as little as RMB 179,800 (USD 25,172) for buyers who opt for an additional monthly battery rental subscription. On September 10, Nio announced plans to raise USD 1 billion through a share sale, partly to fund the expansion of its battery swapping network.
Leapmotor and Xpeng also more than doubled their sales, helped by brisk demand for affordable models. Leapmotor’s B01 electric sedan, was also launched in July. Its price starts just RMB 89,800 (USD 12,572), while Xpeng’s Mona M03 starts at RMB 119,800 (USD 16,772).
Promotions and price cuts on older models were rampant in August amid sluggish consumer confidence, with 23 models, including 14 pure EVs, seeing reductions, according to the CPCA.
The competitive landscape highlights how little has changed despite government calls in July to rein in excessive competition.
So far, regulators have cracked down on things like exaggerated advertising claims about EV functions, including assisted driving technology and battery range. In a “rectification campaign” announced on September 10, the Ministry of Industry and Information Technology and other government agencies said they will target online attacks against carmakers, including those by rival companies and their executives.
Carmakers have pledged to shorten payment periods for their suppliers, but chronic overcapacity remains a key challenge. China’s car factories are estimated to have the capacity to produce nearly twice the 27 million vehicles shipped in 2024, while the industry’s utilization rate stands at about 70%, according to government statistics.
“Regulators are discouraging some of the more aggressive discounting, and they’re tightening the payment rules,” said Bill Russo, founder and CEO of Shanghai-based consultancy Automobility. “But with so much capacity chasing demand that while growing is finite in size … tactical price cuts are still inevitable.”
Russo noted that sluggish domestic demand has failed to meet earlier rosy expectations, even as the industry rapidly shifts from gasoline-powered cars to EVs, leading to “overinstalled [capacity] for vehicles that are no longer in demand.”
That overhang means exports will continue to be a priority for Chinese automakers. A record 116 companies from China flocked to the IAA Mobility 2025 show in Munich, Germany, more than the combined number of exhibitors from South Korea, Italy, and the US.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.