Unless you’ve been living under a rock for the better part of the past decade, you’re probably already aware that China has been aggressively subsidizing its domestic automobile industry. And while it has undeniably produced results, cracks have been appearing in the industry’s economic foundation for quite some time. It now appears they’re getting worse.
According to Reuters, China’s largest automaker, BYD, took a hit to its profits last quarter for the first time in more than three years. In the same report that detailed its quarterly finances, the company also acknowledged that July was its third consecutive month of declining sales. BYD originally expected to sell 5.5 million cars in China alone this year; so far, they’re on pace to miss that target by more than a million units.
China’s problem? Not enough buyers. Subsidies have produced plenty of affordable cars (both gasoline powered and electric; this is not merely an EV push). With manufacturers pumping thousands more cars into the pipeline than their dealerships can sell, everybody ends up taking a bath. This dumping was already starting to take a toll at the end of 2024; it’s obviously getting worse.
And as we noted above, this isn’t simply a matter of Chinese automakers flooding the market with cheap, low-quality electric vehicles. Most of the inventory being dumped into foreign economies is powered by old-fashioned internal-combustion, which makes sense given the markets in question (mostly Russia, Central Asia and the Middle East, Reuters said in June).
BYD was one of several automakers that signed a recent pledge to better keep up with timely payments to its suppliers—a sign that somebody along the line is concerned about bills going unpaid. Surely that’s nothing to worry about, right?
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