The Chinese government has said it will take action to stem the oversupply of new vehicles in China, which it says has led to domestic price wars and “irrational competition” that is destroying the industry’s profitability.
The move to focus on a sustainable auto industry could put an end to cut-price Chinese cars and provide consumers with better vehicles – but at higher prices.
In a state council report published last week, Chinese authorities admitted the country had an oversupply of new vehicles from its factories – something it previously denied.
The claim is backed up by data which reveals a 49.1 per cent utilisation rate of the country’s car-producing capability in 2024 – which still saw 31.8 million new vehicles roll out of automaking facilities in the world’s largest car market last year.
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The figures put China’s current car-making capacity at around 55.5 million annually – more than two-thirds of the 74.6 million vehicles sold in the entire world last year.
Chinese state media published the report in which the government vowed to rein in the climate of “irrational competition” due to over-production and says it will address what it sees as a imbalance between supply and demand.
The Chinese government says it will more closely monitor prices, costs and product quality across the domestic automotive supply chain – where automakers are more fixated on maintaining market share than profits, according to CNBC.
Consumers have been paying less for new cars in China, where an ultra-competitive battle across the industry has driven prices down for the past three years.
More cars have been sold in China each year than anywhere else in the world since 2009, when it overtook the US, with sales tripling since then.
Domestic new-vehicle sales in China amounted to 33.1 million in 2024, but more than 22 million were exported to markets including Australia, which accounted for only 54,344 cars or less than 0.2 per cent of vehicles shipped overseas.
The export figure may also include controversial ‘zero mileage’ vehicles, as part of a process which came into the spotlight after it was criticised by GWM chairman Wei Jianjun in May 2025.
‘Zero-mileage cars’ come from Chinese automakers who have allegedly recorded vehicles as being sold domestically – to meet local quotas – before shipping them overseas where they are sold as used cars.
This is a way to inflate Chinese domestic sales figures and which has also led to reduced sticker prices (and falling profit margins), prompting GWM’s public calling out of the practice which is set to be banned.
Despite being consolidated from hundreds of brands previously, of the dozens of automakers in China less than a handful are currently profitable – led by BYD, Geely (which controls Volvo, Polestar, Lotus and others) and SAIC (MG, LDV and IM Motors).
While it has overtaken Tesla for EV sales globally, BYD – which produces both hybrids and EVs – has cut its prices by more than one-third in China this year.
When they’re not accompanied by higher sales, lower prices and therefore profits can result in a reduced focus on quality, innovation, investment and, for governments, reduced tax revenue and impacts on the broader economy.
The Chinese government is looking to correct the balance, given the unsustainable climate that currently exists – which is also hampered by tariffs from both the European Union (EU) and the US.
While exports are a way to address overcapacity, tariffs may force Chinese automakers to expand supply chains globally, as BYD did by opening a plant in Thailand in 2024.
It has also announced plans to make cars in Mexico and Brazil, while the first BYD is scheduled to roll off its new European assembly line in Hungary later this tear.
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