China is conquering the world in electric vehicles. Its automakers produce far more than any other country and outpace them on innovation. China’s appetite for gasoline-powered cars is fading by the week. In each of the last five months, battery-powered and plug-in hybrid cars made up more than half of all cars sold.

But look closer at the industry, and the picture is not pretty. Already, fierce competition among automakers has gotten ruthless, with about 50 automakers fighting for customers by slashing prices again and again. Manufacturers facing ruinous losses are struggling to pay the companies that supply their parts. And yet they keep borrowing from state-run banks to build more factories, leading to extensive overcapacity.

The frenzy has captured the attention of the highest levels of China’s government. Officials have started a campaign against “involution,” which they define as excessive competition. Xi Jinping, the country’s top leader, led a Politburo meeting on the economy on July 30 that ended with a statement declaring, “It is a must to reinforce industry self-discipline to prevent vicious ‘involution’ competition.”

The results have been mixed. In early June, under orders from China’s cabinet, 17 automakers agreed to pay their suppliers within 60 days of receiving parts. But a government report on compliance on Aug. 11 listed only three automakers, all partly or entirely state-owned, as having set up systems for prompt payment.

Even BYD, the world’s largest E.V. maker, is now running into trouble. It said on Friday that its profits fell by almost a third in the spring compared to a year ago because of price competition.