China is sending its world-beating auto industry into a tailspin

On the outskirts of this city of 21 million, a showroom in a shopping mall offers extraordinary deals on new cars. Visitors can choose from some 5,000 vehicles. Locally made Audis are 50% off. A seven-seater SUV from China's FAW is about $22,300, more than 60% below its sticker price. These deals – offered by a company called Zcar, which says it buys in bulk from automakers and dealerships – are only possible because China has too many cars. Years of subsidies and other government policies have aimed to make China a global automotive power and the world's electric-vehicle leader. Domestic automakers have achieved those goals and more – and that's the problem. China has more domestic brands making more...