A new round of chaotic “price wars” has emerged in the automotive industry. To completely eliminate this self – defeating “inward – looking competition” with no real winners, the automotive sector still has a long journey ahead.
On May 30, the China Association of Automobile Manufacturers issued an initiative. It called on the entire industry to maintain a fair competition order, promote healthy industry development, strictly adhere to the principle of fair competition, and conduct business activities in compliance with laws and regulations. Leading enterprises were urged not to monopolize the market, squeeze out other market players, or infringe on the legitimate rights and interests of other operators. Enterprises were also warned against dumping goods at prices lower than costs, which disrupts market order and harms the fundamental interests of the industry and consumers.
In response, a relevant official from the Ministry of Industry and Information Technology clearly stated in an interview that they agree with and support the initiative proposed by the China Association of Automobile Manufacturers. The Ministry also announced that it will intensify efforts to rectify “inward – looking competition” in the automotive industry.
The Vicious Cycle of Price Wars
The “price war” represents an endless vicious cycle, and those involved are bound to suffer losses. Last year, the “price war” swept through the automotive industry. Despite continuous growth in sales, overall industry profits declined. Data shows that in 2024, the profit margin of the automotive manufacturing industry was 4.3%, an 8% year – on – year decrease, lower than the 5.4% profit margin of all industrial enterprises. In the first quarter of this year, the profit margin of the automotive manufacturing industry further dropped to 3.9%. Ineffective “price wars” are the main cause of the significant reduction in industry profits.
Automobile manufacturers deeply involved in “price wars” will see their profitability, innovation capabilities, supply chain management capabilities, and marketing service capabilities depleted and overdrawn. With deteriorating profitability, how can automakers invest in continuous innovation? Without continuous innovation, long – term enterprise development is impossible. The irrational decline in profits and bottomless cost cuts make it impossible to guarantee product quality and safety. Vehicle enterprises squeezing suppliers, dealers, and service providers layer by layer means that the upstream and downstream of the industry cannot bear these unreasonable profit and cost pressures that violate market rules. As a result, the resilience of the industry’s supply chain, service chain, and value chain is at risk.
Some may think that consumers benefit from “price wars.” In reality, products obtained at so – called “super – value prices” through “inward – looking competition” and “price wars” are often of poor quality. Moreover, many irrational cost – cutting measures may even pose product quality and safety hazards. At the sales and service levels, the distribution and service network is also affected by “price wars,” making it difficult to provide guaranteed pre – sale, in – sale, and after – sale services to consumers. With a significant decline in product and service quality, true product competitiveness, brand value, and influence cannot be achieved.
Industry – wide Opposition and Calls for Change
The achievements of China’s automotive industry in both domestic and international markets should not be undermined by chaotic “price wars.” The strength of Chinese manufacturing, the influence of Chinese brands, and the competitiveness of Chinese innovation should not be damaged by “inward – looking competition.” All participants in the automotive industry chain deeply oppose harmful “inward – looking competition” and “price wars.” To break free from this “competition frenzy,” the entire industry needs to unite, truly implement “anti – inward – looking competition” measures, create a favorable competitive environment, and jointly strive for the industry to enter a track of healthy, sustainable, and high – quality development. The resurgence of the new round of “price wars” has faced “collective resistance” from the industry and enterprises.
Fu Yuzhu, Honorary President of the Chinese Society of Automotive Engineering, said, “The development of China’s automotive industry to this day is the result of the joint efforts of generations of Chinese automotive professionals. We should cherish these hard – won achievements. We are responsible for the high – quality development of the industry and the sustainable development of enterprises. Price wars are unaffordable; they cannot be waged, won, or carried out and must be stopped!”
On June 1, Zhang Jinhua, President of the Chinese Society of Automotive Engineering, published an article stating that as a strategic and pillar industry of the national economy, the automotive industry must resolutely implement the relevant decisions and deployments of the Central Committee and the State Council. It should carry out “internal rectification” of the “clustering” phenomenon in intelligent connected and new energy vehicles under the guidance of the law, strengthen coordination and cooperation among industry self – discipline, social supervision, and government regulation. At the same time, it should guide industry enterprises to view industrial transformation, development, and competition – cooperation from a higher and broader perspective in the context of electrification and intelligence transformation, and accelerate the cultivation of core competitiveness for high – quality and sustainable development.
On the same day, Dong Yang, Chairman of the China Automotive Battery Industry Innovation Alliance, also published an article. He pointed out that China has now entered a new stage of socialism with Chinese characteristics, and new energy vehicles have reached the forefront of the world. Regarding the management of the new energy vehicle industry, it is no longer just about pursuing development speed; it should also consider the stability and long – term development of the industrial order, as well as the coordinated development of China’s new energy vehicles and the global automotive industry. Government authorities are actively exploring innovative management methods for China’s new energy vehicle industry.
Many automakers, including Changan, Chery, GAC, NIO, and Xpeng, immediately voiced their opposition to the new round of “price war.” Deng Chenghao, Vice President of Changan Automobile and CEO of Deep Blue Automobile, believed that the entire industry should jointly open a new chapter of high – quality development for China’s new energy vehicles, focusing on technology and experience. Yin Tongyue, Chairman of Chery Automobile, said that the development of China’s automobiles should rely on technological innovation, brand upgrading, joint collaboration, and common development, with unlimited potential. He Xingqing, Deputy General Manager of GAC Group, said that for GAC, it should adhere to the “value war,” quoting the Chinese saying “you get what you pay for.” Li Bin, Founder, Chairman, and CEO of NIO, called for “rolling technology and services” to become the mainstream in the industry instead of blindly “rolling prices.” He Xiaopeng, Chairman and CEO of Xpeng Automobile, expressed his hope that Chinese automakers would jointly “roll services, technology, and quality” and work together to go global.
The Distinction between Healthy and Destructive Competition
It must be clearly understood that uncontrolled “price wars” are not conducive to the high – quality and sustainable development of industry enterprises and deviate from the original intention of developing new quality productive forces. Whether it is vehicle manufacturers, upstream and downstream participants in the industrial chain and supply chain, or consumers, they will ultimately bear the negative consequences of “price wars.” Undoubtedly, “price wars” and chaotic “inward – looking competition” are stumbling blocks that must be removed on the path of China’s automotive industry’s transformation from large – scale to strong – scale development.
In a market economy, competition is inevitable and is an essential requirement and significant manifestation for enterprises to survive and thrive. The rise of China’s automotive industry is the result of both policy guidance and market mechanism operation. Opposing “price wars” does not mean opposing all forms of competition, including price competition. Value competition is advocated, and price competition is recognized as a basic means to achieve value. However, chaotic “price wars” and normal price competition are fundamentally different. Not all price cuts and discounts are regarded as “unhealthy inward – looking competition” or “price wars,” and there are basic distinctions. This standard largely depends on industry and public consensus. Once this consensus is established, opposing “inward – looking competition” and “price wars” will become a new social consensus.
It is believed that Chinese automobiles will become even stronger within the framework of this expanding new consensus.
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