China’s EV sector doubles down on discounts and cheap financing as growth cools
China’s electric vehicle industry has entered 2026 with another wave of aggressive discounts and cheap financing, as automakers struggle to sustain growth amid slowing demand and intensifying competition. Despite repeated calls from Beijing to curb excessive internal competition, often described as involution, companies across the sector are prioritising short term sales volume over margins in an increasingly crowded market.
Price cuts have become one of the most visible tools as manufacturers attempt to defend market share. BMW recently slashed the price of its all electric i7 M70L in mainland China to below 1.6 million yuan, or roughly 225,000 US dollars. The reduction of more than 300,000 yuan represents a cut of about 16 percent and places the luxury model well below its previous pricing. BMW has also lowered prices on several other electric and petrol powered vehicles in China by at least 10 percent, according to information published on its official website.
The move underscores how even premium international brands are being drawn into China’s price war, which was initially driven by domestic manufacturers targeting mass market buyers. Analysts say foreign automakers face mounting pressure as local brands improve quality, expand model ranges, and leverage cost advantages in batteries and supply chains.
Chinese companies are also turning to financial incentives to stimulate demand. Xiaomi, which entered the automotive market last year, has launched a two month promotional campaign for its first sport utility vehicle, the YU7. The offer includes three years of zero interest financing, a strategy designed to lower the upfront cost for consumers at a time when confidence remains fragile.
These incentives come as China’s EV market shows signs of cooling after years of rapid expansion. While overall sales volumes remain high, growth rates have moderated as the market matures and competition intensifies. Smaller and less established manufacturers are feeling the strain most acutely, with profitability under pressure and consolidation increasingly seen as inevitable.
Beijing has repeatedly urged automakers to avoid destructive price competition, warning that relentless discounting could weaken the industry’s long term health. Regulators and industry bodies have highlighted risks including shrinking margins, reduced investment in innovation, and financial instability among weaker players. However, with inventory levels rising and consumer demand becoming more selective, many companies see few alternatives in the near term.
Cheap financing has emerged as a particularly powerful lever, especially for younger buyers and families weighing the higher upfront cost of electric vehicles. By spreading payments over longer periods with little or no interest, automakers hope to keep showrooms busy even as economic uncertainty weighs on household spending.
Industry observers say the renewed price war reflects a deeper structural challenge. China’s EV sector now hosts dozens of brands competing across overlapping segments, from entry level city cars to high end luxury models. As growth slows, survival increasingly depends on scale, efficiency, and access to capital.
While the latest discounts may boost short term sales, analysts caution that sustained pressure on margins could accelerate shakeouts in the sector. As 2026 unfolds, the balance between government guidance and market realities will play a crucial role in determining which players emerge stronger from China’s fiercely competitive EV landscape.
