China Moves to End Battery Price War With New Rules From 4 Ministries

(P1) Four of China's most powerful economic and industrial ministries have jointly intervened to rein in what they termed "irrational competition" in the country's massive power and energy storage battery industry, signaling a decisive state-led push to end a damaging price war. The symposium, co-hosted by the Ministry of Industry and Information Technology (MIIT), the National Development and Reform Commission (NDRC), the State Administration for Market Regulation (SAMR), and the National Energy Administration (NEA), gathered key industry players to establish new rules of engagement.

(P2) The joint directive aims to "consolidate and deepen the work of standardizing the order of industrial competition," according to a statement released by the MIIT. The meeting emphasized the role of a cross-departmental coordination mechanism to guide the industry toward "high-quality development."

(P3) Regulators laid out a multi-pronged strategy to manage the sector, including the implementation of capacity production warnings, the standardization of price competition, and a crackdown on lengthy supplier payment cycles. The plan also involves strengthening product quality supervision, protecting intellectual property rights, and governing what was called the "internalization of involution," a reference to domestic over-competition spilling into global markets.

(P4) This intervention is the clearest sign yet that Beijing intends to halt a brutal price war that has eroded profitability for even the largest players, such as CATL and BYD. While potentially improving margins for producers, the move could lead to higher battery costs for electric vehicle manufacturers in China and globally, potentially altering the cost structure for the entire EV supply chain.

A 'Negative Behavior List'

A key outcome of the symposium was the discussion of a "negative behavior list" for the battery industry. While the full list has not been made public, the concept points to a more formalized system for policing corporate conduct. The measures discussed included regulating local government investment incentives, which have been criticized for fueling over-investment and excess capacity in the sector. By defining and penalizing specific anti-competitive actions, the government aims to shift the industry's focus from a pure price-based fight for market share to a more stable, technology-driven competition. The move could accelerate consolidation, favoring established companies with strong balance sheets and technology, while pressuring smaller, less efficient producers.

This article is for informational purposes only and does not constitute investment advice.