China has become home to the world's biggest demolition derby as electric carmakers ratchet up their battle for dominance amid calls from Beijing for businesses to stop their price wars for the greater good of the economy. With four out of five Chinese electric vehicle brands forecast to end up by the wayside by the end of the decade, analysts believe that only those with the best technology - and cheapest prices - will be left standing. This means that investors have navigate a careful course for EV stocks, they add.
When the politburo met last month to discuss economic issues, China's leaders called on businesses to refrain the "vicious competition of involution" and discipline themselves. Involution, for those who don't already know, is a popular term in the mainland used to describe unnecessary, excessive and ineffective competition. The politburo also vowed to strengthen an elimination mechanism that will enable inefficient enterprises to quit the market smoothly, in a tacit acknowledgment of the overcapacity and price wars dogging the economy.
BLAME GAME EV manufacturers have been engaged in price wars since last year, with each accusing the other of not playing by the book. Guangzhou Automobile (2238) and Geely Holding have criticized involution among their rivals, especially taking aim at BYD (1211), which recently rolled out two cheaply priced upgraded plug-in hybrids while Nio (9866) has been bickering with Li Auto (2015) urging it stop releasing weekly sales rankin.