The Chinese economy appears to be in a little bit of danger. China is calling on its electric vehicle industry to stop cutting prices and rein in production as persistent deflation is expected to put the economy at greater risk.
Chinese officials have been repeatedly speaking about ‘involution’ in sectors facing a lot of overcapacity, such as electric vehicles – shedding light on a phenomenon of investing more effort and money for diminishing returns.
In a speech this month, President Xi Jinping criticized provincial authorities for blindly overinvesting in artificial intelligence and in more energy vehicles, industries that have been identified as strategic priorities but are also at the risk of overheating.
Companies cutting rates in a play for market dominance
The Chinese President has spoken directly about the problem. Earlier on July 23, he stressed the importance of stopping ‘involution’ – a crisis that continues to grip parts of the country’s economy, the second-largest after the US.
Some of the biggest car companies in China have been informed about overcapacity by the authorities. But consumers are also expecting rock-bottom prices. This leads to some companies significantly cutting rates in a play for market dominance.
The electric vehicle market in China is no exception. One of the most prominent names in the industry, BYD, has repeatedly cut the price of its Seagull, most recently selling it for just 55,800 yuan – nearly 20% less than the official retail price, according to a report in the Guardian.
