China car wars keep raging on other battlefields

Zhejiang Leapmotor Technology Co

28/05/2026 03:26

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.
By Katrina Hamlin

    HONG KONG, May 28 (Reuters Breakingviews) - China’s carmakers are locked in brutal rivalry, but battle tactics are changing. A year after Beijing tried to head off spiralling competition among BYD 002594.SZ, Geely, Nio 9866.HK, Xpeng 9868.HK and peers, policymakers have notched up some wins. Yet none of the measures fix fundamental overcapacity, leaving companies fighting for customers at home and abroad.
Around this time last year, Beijing kicked off a campaign cracking down on involution – excessive, self-destructive rivalry. That included demanding companies pay suppliers within 60 days and calling for an end to deep discounts.
They can claim a few victories. Take the country’s largest electric-car maker, BYD. The $119 billion company’s days payable outstanding – an accounting measure that approximates how long it takes to pay vendors – clocked in at around 115 days last year, down from 142 in 2024, per analyst estimates gathered by Visible Alpha. Between December 2025 and March 2026, total debt more than quadrupled, which suggests it is now borrowing the necessary money rather than pushing back payments. Other carmakers including Geely Automobile 0175.HK, Xpeng and Seres 601127.SS are also paying suppliers sooner, the data suggest.
Overly aggressive incentives have been harder to kill off. But the average discount has narrowed 25% this year, per the China Passenger Car Association, as the government banned carmakers from selling new vehicles below cost. Average selling prices for six leading brands are forecast to rise this year, Visible Alpha shows.
But the biggest problem persists. Measures so far are insufficient to drive all but the smallest players towards consolidation, per Morningstar analyst Vincent Sun. That leaves massive oversupply, forcing manufacturers to extreme lengths to sell cars and protect margins.
With price cuts and creative supply chain financing off the table, the most obvious tactic is targeting exports, which grew 80% in April. These accounted for nearly half of BYD's sales so far this year; Stellantis STLAM.MI partner Leapmotor 9863.HK more than quintupled its overseas shipments. Others, like Xiaomi 1810.HK, are preparing to sell outside China for the first time.
Another strategy is a race to the top, rather than last year’s race to the bottom. Last week BYD launched a new version of a flagship premium Denza SUV featuring more than 100 upgrades and a starting price 5% higher than its predecessor. A day later rival Xpeng introduced the high-end GX, part of a push upmarket. Larger cars crammed with cutting-edge tech attract attention and help justify higher prices. They are also hunting for ways to burnish their brands: BYD is exploring an entry into Formula One, the Financial Times reported.
The art of war may look different now, but Chinese carmakers remain locked in battle.
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CONTEXT NEWS
June 1 will mark one year since the introduction of new rules requiring Chinese carmakers to settle most payments with suppliers within 60 days.
In May last year, the country’s Ministry of Industry and Information Technology and trade group China Association of Automobile Manufacturers warned automakers about the potential negative impacts of price wars.
The moves were part of a broader campaign against the industry’s “involution” – a term referring to excessive, self-destructive competition.

Chinese carmakers are reducing the number of days it takes to pay suppliers https://www.reuters.com/graphics/BRV-BRV/gkplkokkrvb/chart.png
Discounts per car have started to fall in China https://www.reuters.com/graphics/BRV-BRV/gdvzaoagwpw/chart.png
(Editing by Antony Currie; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))