In a bid to halt the ongoing “price wars” among automakers, the China Association of Automobile Manufacturers has issued the “Initiative on Maintaining Fair Competition Order and Promoting Healthy Industry Development”, firmly expressing its opposition. The Ministry of Industry and Information Technology has also thrown its support behind the initiative, stressing that “there are no winners in a ‘price war’ and it has no future.” This clear signal and resolute stance have come at a timely moment, effectively putting a stop to the chaotic “price war”.
Price Wars Disrupt Industry Ecology and Economy
Over the past two years, despite some automakers repeatedly voicing concerns about “cut-throat” competition, they have continued to initiate “price wars”, severely disrupting the industry’s ecological balance and market order. This has also posed a threat to the safety of the industrial chain and supply chain. Data reveals that the profit margin of the automotive industry in 2024 was a mere 4.3%, lower than that of the entire downstream industry and the level in 2023. In the first quarter of this year, the profit margin further declined to 3.9%.
On one hand, the industry has witnessed record-high production and sales volumes and positive reputations. On the other hand, it faces the dilemma of “the more they produce, the more they lose” and “increased revenue but no growth in profit”. This divergence clearly indicates that the industry is in an unhealthy state and unsustainable in the long run.
Hidden Risks Lurk Beneath the Surface of Price Wars
Although the “price war” rages on, it is rife with deep-seated risks. Suppliers’ profit margins, accounts receivable, production workers’ wages and benefits, product quality and safety, as well as consumers’ legitimate rights and interests in after-sales service, all bear the brunt. Low-priced and low-quality products will also seriously undermine the hard-won international image and reputation of “Made in China”.
History serves as a valuable lesson. In the late 1990s, Chinese motorcycles, renowned for their good quality and low prices, were popular in Southeast Asia. However, the price war ultimately led to a decline in product quality, resulting in the loss of market share and a sharp drop in the reputation of “Made in China”. Today, it is imperative to prevent the same “Waterloo” from befalling the new energy vehicle industry.
Innovation, Not Low Prices, Drives “Made in China” Forward
The reason why “Made in China” has been able to transform from a follower to a leader in many fields is not primarily due to low prices, but rather innovation. In the past, domestic gasoline-powered vehicles priced under 100,000 yuan were overlooked by the market. Nowadays, domestic new energy vehicles priced over 200,000 yuan are in high demand. The transformation is underpinned by technological innovations such as intelligent driving, advanced batteries, and smart cabins. Currently, “Made in China” is at a crucial stage of transitioning from a “price-oriented” to a “value-oriented” approach.
Automakers Urged to Adopt Long-Term Strategies
Currently, the new energy vehicle industry is developing at an astonishing pace, with automakers worldwide increasing their investment in new technology and product research and development. Although Chinese automakers have certain advantages, they are far from being significantly ahead and should not become complacent.
Automakers must adhere to a long-term development philosophy, reduce production costs through technological and management innovation, and offer consumers higher-quality and more cost-effective products. They should not distort business logic under the influence of capital and rely solely on price wars to pursue short-term market value and stock prices. Otherwise, once capital cashes out and withdraws, the industry will be left as an empty shell that “sells at a loss for publicity”, and the process of going global will be hindered.
New Governance Approaches Needed to Address Price Wars
From a governance perspective, new ideas and measures are urgently required to rectify the disorderly “price war”. Questions such as how to define “unreasonable low prices” and how to distinguish between effective competition and “inward-looking” competition need to be answered. With decisive actions and prudent inclusiveness, it is entirely possible to accelerate the high-quality development of domestic automobiles and open up broader development space for “Made in China”.
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