China wants to put an end to price wars, but its BYD car manufacturers, Geely not convinced – Firstpost

The China Market Regulator, the State Market Regulation Administration (SAMR), recently held a meeting with the senior executives of the main solar, automotive and technology companies. The reason? To address the growing problem of Neijuano Involution, a harmful price reduction cycle that has harmed the profits and stopped innovation.

According to him Post in the morning of southern ChinaThe meeting was led by Deputy Minister Meng Yang and focused on finding solutions for excessive market competition, which threatens the long -term stability of these industries.

Executives of companies such as Baic Group, Mercedes-Benz, Alibaba Group, JD.com, Trina Solar, Ja Solar Technology and Longi Green Energy Technology were present. However, some of the most important players in the intense war price war in China, Byd, Geely, Tesla and Chery, did not attend. His absence raises doubts about how effective will be Beijing’s plans to control price reduction.

Neijuan and the challenges of industrial overcapacity

The problem of Neijuan It has become a pressing concern for Beijing. It refers to an economic point where companies invest resources without proportional yields. The phenomenon has affected the solar and EV sectors of China, particularly, reducing prices to unsustainable levels. The National Development and Reform Commission (NDRC) has made this issue address a priority for 2025, asking for the “comprehensive rectification of involuntary competition”, the Post in the morning of southern China saying.

While Beijing’s leadership recognizes the problem, his attempts to address it have remained largely rhetorical. Julio de Politburó meeting marked the first time Neijuan It was explicitly mentioned in a reading of the central government conference, indicating its recognition at the highest levels. However, concrete policies remain elusive, and industry leaders remain skeptical that the government takes significant measures.

The missing players: why Byd and Geely did not appear

The absence of Byd and Geely at Samr’s meeting is particularly revealing. These two companies, together with Tesla and Chery, have been at the forefront of China’s car price wars. Byd, the world’s largest EV manufacturer for sales, has aggressively reduced prices to maintain dominance in China’s competitive market. Geely, similarly, has been dedicated to the frequent brief prices, which makes it difficult for smaller car manufacturers to survive.

While Mercedes-Benz and Baic attended the meeting, these companies have less influence on China’s national price competition. The absence of Byd and Geely suggests that they do not believe that government intervention changes the fundamental market dynamics. If the most aggressive price reduction companies refuse to participate in the discussions, Beijing’s efforts can be convicted from the beginning.

Beijing’s reluctance to intervene

One of the key concerns is that Beijing has been reluctant to take direct measures against price wars, despite recognizing the problem. According to a Think of China Report in August 2024, since at least 2022, the Cleantech sector of China has faced Neijuan, however, the authorities have been largely based on the dialogue instead of the intervention.

Gary Ng, Natixis’s senior economist, said Post of the South China Sea That industries such as solar and electrical vehicles are fighting with overcapacity, which is intensifying price wars. He explains that solar cells and cars are among the sectors that experience relatively high overcapacity. Regarding Internet platforms, he said that the problem comes from a different cause: resources are concentrated between a few dominant players, whose market pricing power requires sellers to reduce their prices.

The automotive industry of China is currently locked in a brutal price war that reflects what economists call a “race towards the bottom.” Companies continually lower prices in an attempt to undermine competitors, but this has the cost of profitability and innovation. The phenomenon is not exclusive to China: similar trends have been observed in other industries worldwide. However, the economy of the State and the emphasis on China’s industrial expansion have made it particularly severe.

Large automobile manufacturers such as Byd and Geely can reduce prices, but smaller competitors will be expelled from business. In the long run, this could lead to market monopolization instead of healthy competition. In addition, excessive price reduction reduces incentives for companies to invest in new technologies, ultimately slowing the rhythm of innovation in the automotive sector of China.

If the government decides to intervene, it faces significant risks. Strict price controls or regulatory repressions could suffocate competition, which makes the market less dynamic. On the other hand, allowing price wars to continue without control can lead to industry instability and economic recessions. The central dilemma for policy formulators is to find a middle ground where competition is still fair but does not become destructive.

Until now, Beijing has opted for a cautious approach, urging companies to exercise self -control. However, as history has demonstrated, it is unlikely that trusting corporations to voluntarily stop price wars work.

Is the change coming?

Despite rhetoric, there is little evidence that Beijing is prepared to take bold measures. The meeting with industry leaders indicates the recognition of the problem, but without the participation of Byd, Geely and Tesla, the greatest actors in the price war, there are little hope for immediate change.

For now, the automotive sector of China remains in a state of intense competition with the price wars that continue to erode the profits. If the communist regime will ultimately intervene remains uncertain. Until then, China’s car manufacturers seem to be prepared to remain in the current price war, convinced that market survival depends on aggressive prices instead of regulatory relief.