Li Auto Alleges Malicious Attacks Amid 19% China EV Sales Slump

Li Auto founder Li Xiang has accused an unnamed competitor of orchestrating a widespread smear campaign, a move that signals escalating tensions in China’s hyper-competitive electric vehicle market where domestic sales have fallen for five straight months.

"This is the most vile behavior," Li Xiang wrote on his personal WeChat Moments, stating the company would pursue legal action and call for regulatory intervention against what he described as a coordinated attack by paid marketing accounts and online trolls.

The allegations come as the latest data from the China Association of Automobile Manufacturers shows a 19.2% year-on-year drop in domestic passenger car sales in March, the fifth consecutive month of decline. This domestic weakness contrasts sharply with a surge in exports, with Chinese automakers shipping 748,000 passenger cars in March, an 82.4% increase from the prior year.

The incident highlights the immense pressure on Chinese EV makers like Li Auto, Nio, and Xpeng, who are locked in a fierce price war for domestic market share. For investors, the alleged "black water army" tactics suggest that the rivalry is moving beyond pricing to potentially damaging reputational warfare, creating a new layer of operational risk for companies in the sector.

The public accusation from Li Xiang, a prominent figure in China's auto industry, brings to light the shadowy world of "black water armies" (hei shuijun) – legions of fake online accounts used to manipulate public opinion. These campaigns can involve spreading disinformation, posting negative reviews, and flooding comment sections to damage a competitor's brand.

While Li did not name the competitor, his post claims the attacks involved fabricating false information to damage Li Auto's product reputation. The move comes after a government initiative in 2025 aimed to curb "anti-involution" practices and malicious competition, which Li noted had initially improved the industry's atmosphere.

The backdrop for this corporate clash is a slowing domestic market. After years of rapid, subsidy-fueled growth, Chinese EV makers are now grappling with scaled-back government support and weakening consumer sentiment due to a prolonged property slump. "Fierce competition in China among car brands and a prolonged property sector slump that has weighed on consumers' desire for big purchases also impacted Chinese automakers," the Associated Press reported recently.

In response to the domestic slowdown, Chinese EV companies, including giants like BYD and Geely, have aggressively expanded into overseas markets. Exports of new energy vehicles, which include electric cars and plug-in hybrids, soared by over 140% in March compared to the previous year, finding new customers in Europe, Southeast Asia, and Latin America. This export boom, however, does not fully insulate companies from the brutal fight for customers at home.

The alleged smear campaign against Li Auto could trigger a regulatory probe into the industry's competitive practices. The outcome of any legal action could set a precedent for how such disputes are handled, potentially impacting the stock performance and brand reputation of all players in the world's largest and most crowded EV market.

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