Back in the 2010s, Chinese policymakers saw an opportunity to build their automotive industry, why compete with established western brands on internal combustion, when you can leapfrog and build EVs. It is a brilliant move, many Silicon Valley strategists would be proud (source). But somewhere along the way, the Chinese build capacity to build 50 M cars a year, about 55% of world demand for new cars, and almost double the 30 M or so cars sold in China back in 2023. This has lead to aggressive pricing, lots of exports, and leading some industry analysts to dub the term the Chinese bloodbath.
There are several reasons for why China’s EV adoption rate exceeds 50% (source). Price is certainly one, apparently 5 Chinese EVs can be had for what the average American car sells for (source). But other regulatory requirements also play a major role. Want to drive your Bejing car on odd numbered days but your license plate says otherwise? No problem if you have an EV (source). That is assuming you can get a car in Bejing at all, which some say is much easier with an EV (source). Fuel is also more expensive in parts of China. Hong-Kong is perhaps an extreme example, at a little over $5/liter (source).
For much of the 2010’s western auto-makers loved China. Take for example Shanghai Automotive Industry Corporation (SAIC) joint venture with General Motors (GM). Briefly the plan was to manufacture GM cars in China for domestic and regional sales, GM would provide expertise while SAIC worked on production. The plan worked beautifully for GM, adding $2B in profit, about a quarter of the total profit back in 2018 (source).
This all fell apart in the 2020’s as domestic competition ramped up, EVs became a thing, and domestic China car sales stayed relatively flat (source). A near perfect storm, especially since some market researcher might have looked at the chart above in say 2018, and decided, given past growth, that Chinese car sales were going through the roof, hence one ought to invest in additional manufacturing capacity. Perhaps that is how China found itself with the capacity to make about half the new cars the world needs (source, and source).
What to do in such a situation? Dropping prices in the hopes that it may stimulate demand is a good first step, followed by exports. After all there is no way around this, building factories to build cars is very expensive (source), hence you gotta move cars, fast.
One thing seems clear, Chinese car makers are looking at thinning margins, BYD for example has seen its operating margin shrink to about 1 % in 2025 (source). Not everyone is going to survive such a competitive environment.
Electric car adventures 