""There are too many entrepreneurs, too many engineers, and too much desire for local governments to support local champions," he said. "Brutal competition has produced many of China's successes, for example, in solar and electric vehicles. It is also a reason for many of these industries to have low profits," he added."
""This sort of expansion is driven both by the fiercely competitive market environments and by government subsidies that make it easier for companies to try their hand at making new products," he wrote. "They allow companies to unleash a flood of undifferentiated products, ruthlessly underbid each other, and pray their competitors run out of money before they do," he added."
China's electric-vehicle market contains an excess of startups and founders engaged in intense competition for market share. Government subsidies and local-government support encourage entrepreneurs and engineers to enter the EV sector and experiment with new products. Intense rivalry has driven successes in sectors like solar and EVs but has also compressed profit margins across many companies. The market dynamic produces many undifferentiated products and aggressive undercutting as firms attempt to outlast rivals financially. Financial strain from the price war is emerging: BYD reported its second-quarter net profit fell about 30% year-over-year, reflecting mounting pressure on industry profitability.
Read at Business Insider
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