A cautionary tale of misaligned incentives and industrial overreach has emerged from China, as state television’s Focal Point program named electric vehicle maker Neta Auto — and its parent company Hozon New Energy — as a prime example of the destructive consequences of local government investment competition.
Eager to generate economic results, local governments across China have long competed fiercely to attract major enterprises through lavish incentives. Yichun, a city in Jiangxi province with no prior automotive industry base, invested 500 million yuan (approximately $68.8 million USD) to lure Neta Auto into building a factory there. Incentives included equity stakes, government-built facilities, ten years of rent-free terms, and a 20,000 yuan (approximately $2,750 USD) subsidy for every vehicle sold locally. Similar arrangements were made in Tongxiang, Zhejiang, and Nanning, Guangxi, where land and factory costs were also borne by government-affiliated enterprises.
What once looked like a regional development triumph has unraveled dramatically. Neta Auto’s Yichun “smart factory” now stands empty. Between 2021 and 2023, Hozon New Energy accumulated net losses of 18.3 billion yuan (approximately $2.52 billion USD) — losing over 80,000 yuan (approximately $11,000 USD) on every vehicle sold. By 2024, all three production lines had halted, and in the second half of 2025, the company entered bankruptcy restructuring proceedings.
Chinese officials have since acknowledged the systemic problem. A deputy director at the National Development and Reform Commission warned that subsidy competitions distort market mechanisms, encourage irresponsible corporate investment, and fuel industrial overcapacity and price wars — dynamics visible across multiple collapsed EV brands including HiPhi, Byton, and Bordrin, all of which received local state capital. Regulators have signaled these practices must be reined in to protect China’s unified national market.
Source: Central News Agency (Taiwan), April 23, 2026
https://www.cna.com.tw/news/acn/202604230248.aspx