China’s electric vehicle (EV) sector, once championed as a symbol of modern industrial prowess, is now facing a dramatic and multifaceted implosion. At the heart of this decline lies a troubling strategy, state-enabled technological theftfollowed by unsustainable industrial policies and escalating economic fallout. What began as a race for global supremacy in the automotive future is rapidly devolving into a civil war of bankruptcies, protests, and shattered reputations.
The roots of this crisis can be traced to Beijing’s aggressive bid to dominate high-tech sectors through its “Made in China 2025” campaign. To leapfrog innovation cycles, the Chinese Communist Party (CCP) resorted to sophisticated cyber espionage operations. Groups like APT41 and Operation CuckooBees targeted foreign automakers and suppliers, siphoning blueprints for electric drivetrains, battery chemistries, autonomous driving technologies, and more. This exfiltrated intellectual property became the foundation for a rapid domestic expansion, but such reverse-engineered innovation lacked the resilience and adaptability that comes from genuine R&D.
Flush with stolen technologies and generous subsidies, the CCP catalysed an explosion of EV start-ups. At one point, China boasted nearly 487 manufacturers, from giants like BYD to newcomers like Neta, Weltmeister, and HiPhi. However, the state’s prioritization of quantity over quality and optics over viability seeded structural vulnerabilities across the sector. Subsidies promoted production rather than profitability, creating an ecosystem where unsustainable competition and technological stagnation became the norm.
The results are now cascading across China’s automotive landscape. Neta Auto, once a rising star valued at 25 billion yuan, is undergoing bankruptcy restructuring. Its international venturesparticularly in Thailand have unravelled. Thai consumers complain of closed service centres, unavailable parts, and dissolved warranties, prompting some to seek refunds. In China, over 400 legal disputes and tens of millions in unpaid debts have triggered employee sit-ins, dealership protests, and supplier lawsuits. The collapse of Neta is not an isolated incident; it symbolizes the fragility of China’s broader EV architecture.
BYD, China’s flagship EV brand, also faces escalating distress. The company is drowning under nearly 600 billion yuan in debt, with a debt ratio exceeding 70 percent. Dealers in Shandong have folded, leaving thousands of car owners stranded without support. Suppliers complain of delayed payments, sometimes extended for up to 275 days, forcing them to act as de facto creditors. The massive debt bomb threatens to turn BYD into the next Evergrande, a cautionary tale of ambition outpacing accountability.
The turmoil is exacerbated by a nationwide price war. In May 2025 alone, over 100 EV models slashed prices, some by more than 50,000 yuan. This race to the bottom has eviscerated profit margins, driving industry-wide average profitability down to 3.9 percent, well below standard manufacturing benchmarks. Steel producers and battery suppliers are haemorrhaging money, forced to absorb downstream losses triggered by carmakers. The China Steel Industry Association condemned these tactics, accusing manufacturers of shifting financial burdens to upstream partners and undermining the entire supply chain.
Beyond financial ruin, the crisis has inflicted deep wounds on labour rights and consumer trust. CEOs have been besieged by unpaid workers demanding salaries, while dealership closures have stranded thousands of vehicle owners. Spare parts are becoming prohibitively expensive. Lifetime warranties now ring hollow, replaced by a lifetime of uncertainty and appeals. Second-hand EVs have plummeted in value, losing over 70 percent of their resale worth.
Political interference compounds these problems. The CCP’s increasing control over private firms through embedded party committees, opaque financing practices, and regulatory overreach has blurred the boundaries between market forces and political directives. The state’s obsession with maintaining dominance often undermines basic business logic, leaving firms ill-equipped to navigate real-world economic pressures. The same central planning that once enabled explosive growth is now suffocating the industry it built.
Internationally, these failures are beginning to tarnish China’s global reputation. Neta’s meltdown in Thailand is a harbinger of what lies ahead: the export of systemic instability. Countries that welcomed Chinese EV makers are now grappling with operational chaos and falling consumer confidence. As smaller firms collapse and larger players like BYD teeter on the edge, Beijing’s dream of global EV supremacy is rapidly disintegrating.
The strategic implications are profound. The CCP’s modelbuilt on tech theft, subsidized expansion, and centralized controlwas never designed to endure market adversity. It thrived under artificial support but cannot withstand competitive pressure or deliver on sustainability. China’s EV story may not end with innovation and dominance but with debt, disillusionment, and diminished influence.Rather than the next Tesla, BYD may be remembered as the next Evergrande, an empire built on sand.