by ZHOU Shuqi

China's electric vehicle industry continues to post record sales and exports, but regulators are tightening oversight as price competition intensifies, and safety risks rise in the world’s largest auto market.

Data from the China Association of Automobile Manufacturers show that from January to November 2025, China's new energy vehicle (NEV) production and sales — an official category covering battery electric and plug-in hybrid vehicles — both nearly reached 15 million units, up more than 30% year on year. NEVs accounted for 47.5% of total vehicle sales, far above levels in major Western markets. Exports rose to 2.32 million units, roughly double the level a year earlier.

That rapid expansion has sharpened concerns over aggressive price-cutting that is eroding margins and distorting competition. On Dec 12, the State Administration for Market Regulation released a draft pricing compliance guide, warning automakers not to engage in unfair price competition beyond clearing excess inventory.

Regulatory pressure is also moving upstream. A rule that took effect on June 1 requires large companies to pay small and medium-sized suppliers within 60 days of delivery. Most major Chinese automakers pledged compliance as authorities sought to ease financial strain across the supply chain.

YANG Jing, a director for Asia-Pacific corporate ratings at Fitch Ratings, said payment discipline alone would not resolve deeper risks. "The bigger issue is whether costs and margins can be redistributed sustainably, and whether low-price dumping can be restrained," she told Jiemian News.

Safety has become an equally pressing concern. As vehicles grow more software-defined and competition intensifies, industry executives say corporate self-regulation is no longer sufficient. Oversight of assisted-driving systems, software updates and accident investigations is increasingly under scrutiny.

A key challenge is that regulation has struggled to keep pace with technology. National standards often lag rapid innovation, allowing new features to reach mass markets before clear benchmarks are in place. While authorities have issued new standards this year, many technologies were already widely deployed by the time rules took effect.

Acceptance of tighter regulation remains uneven. Stricter standards can lengthen development cycles and raise costs, potentially delaying product launches. Existing standards, executives say, often act as a safety backstop rather than a binding constraint, allowing some risks to surface only after large-scale deliveries.

Regulators face a balancing act. Locking in rigid rules too early could slow innovation, a key driver of China's EV rise. Many industry participants argue oversight should focus on market-entry thresholds, testing requirements and accountability rather than specific technology paths.

Those mechanisms remain incomplete. Accident investigations still rely heavily on manufacturer-provided data, and China lacks a permanent, independent framework for probing complex software-related vehicle incidents.

In contrast, the United States separates accident investigation from regulatory enforcement, with independent probes conducted by the National Transportation Safety Board and penalties handled by the National Highway Traffic Safety Administration. Industry executives say the separation raises the cost of failure — something China has yet to replicate.

Enforcement costs also differ sharply. In the US and Europe, punitive damages and class-action lawsuits can run into billions of dollars, forcing automakers to prioritize safety and compliance. In China, administrative fines are often seen as manageable operating expenses.

"Regulators need to act as the sword of Damocles hanging over companies," one senior auto executive told Jiemian News.

Scrutiny is tightening most visibly around software and assisted driving. In April, the Ministry of Industry and Information Technology ordered full validation of driver-assistance functions, barred limited user testing ahead of approval, and placed frequent over-the-air updates under closer review.

Engineers say oversight intensified after a high-profile accident involving Xiaomi's car unit, a recent entrant backed by the consumer electronics giant, with software changes affecting core parameters now taking months to clear, compared with a simple filing process previously.

For industry observers, the direction is clear: China's EV sector is entering a more tightly regulated phase, where scale and speed alone will no longer be enough. Compliance, safety and sustainable margins are becoming central to the next round of consolidation — shaping how Chinese EV makers compete at home and abroad.