The China Competition

It has been a hectic few months in China, as Tesla wrestles with local competition to secure a place in the asian country’s growing EV market.

Since January, the company has been lowering the prices of vehicles across their fleet in order to appeal to Chinese customers. This led some of the local companies to start doing the same - lowering prices in a bid to out-do each other for months now.

Until sometime last month, when talks between the companies began. These price cuts were great for the consumers - except for the confusing fluctuations - but not so good for the companies fighting for the top spot.

However, these talks seemed to go well. 16 China-based auto companies got together and hashed out a deal - companies like BYD, Xpeng, Geely - and of course Tesla - all sat down and came up with some rules of engagement for their future dealings; and on July 6th, executives from all 16 companies sat down for a public signing.

The non-binding agreement’s core was built around keeping everyone’s pricing from wildly disrupting business - only small changes within reason were to be allowed in order to maintain fair competition. Other rules governed the use of publicity, making sure the signatories wouldn’t say false or exaggerated things to get customers. The companies would also pledge to keep the quality of their products high - no cutting corners to get higher profits. And finally - as China is a Communist country in name at least - the signatories had to promise to promote core socialist values - mainly those centred around social and community responsibility, and safety.

This sort of cooperation is fairly common in Western countries - but China isn’t like those countries, and the China Automobile Manufacturers Association saw a glaring flaw in the deal - it was illegal.

The wording of the very first part of the agreement - specifically that the companies would “not disrupt the fair competition order of the market with abnormal prices.” was not acceptable. According to CAMA, this line - while being presented as a promotion of fair competition - violated the spirit of China’s Anti-Monopoly law.

At first this seems pretty unfair. China’s EV market has been the Wild West for months now, and any sort of agreement would go a long way to stabilising things a bit. But CAMA didn’t say the rest of the deal was bad - just that this one line needed to be amended before it was approved by the government.

And to be fair to CAMA, this is their job. Things are different in Western countries - where monopoly laws are mostly toothless. These companies would have to communicate with each other about their prices in order to not lower or raise them by “abnormal” amounts - which could easily lead to these 16 companies deciding together what their prices will be regardless of demand. That’s a lot of power for profit-driven groups to have.

Aside from all of that though, these companies realising there is a problem, and coming together to try and solve it, is a big step. Maybe with a bit of communication between them and CAMA, these automakers can find a way to settle the market without breaking any laws.