China’s EV manufacturers face their ‘Evergrande moment’

YOU know that things have reached an inflection point when China’s People’s Daily newspaper warns against “involution” in an industry, noting that firms and factories have been racing to produce the same products and barely making a profit. In this case, the warning was aimed at the 100 or so electric vehicle (EV) makers. That number is, by any measure, way more that any car market, even one as big as China’s, can sustain.

Evidence that the nation’s car market remains oversupplied has been mounting in recent years. As recently as five years ago, there were about 500 firms producing EVs. That their numbers have declined so dramatically provides a useful metric about brutal market conditions.

Indeed, one industry executive spoke of an industrial “elimination round” taking place over the next two years. A few days later, the chairman of Great Wall Motor, Wei Jianjun, was quoted as saying that China’s EV industry is experiencing its own “Evergrande moment”, referencing the collapse of the country’s most indebted property developer last year.